UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to Section 240.14a-12
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AMGEN INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Robert A. Bradway Chairman of the Board, Chief Executive Officer and President | ||
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Amgen Inc. One Amgen Center Drive Thousand Oaks, CA 91320-1799 |
April 8, 20197, 2020
Dear Fellow Stockholder:
You are invited to attend the 20192020 Annual Meeting of Stockholders, or Annual Meeting, of Amgen Inc. to be held on Tuesday, May 21, 2019,19, 2020, at 11:00 A.M., local time, at the Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362.Pacific Time.
Our Mission and Strategy::We seek to develop innovativemedicines that address important unmet medical needs in the fight against serious illness. This objectivemission is the central underpinning of our strategy, which includes an integrated setinherently long-term, and in service of activities to strengthen our competitive position in our industry. In addition to our significant commitment to innovative researchpatients and development and the commercialization of the medicines we make,their families.
Our Heritage:This month, we are developing branded biosimilars which utilizecelebrating our fortieth anniversary. Entrepreneurs started Amgen 40 years ago knowing that biotechnology could change lives. Today, our innovative medicines can be found in approximately 100 countries. We are proud of what Amgen has accomplished in the past four decades, and excited for what the future holds.
Execution of Our Strategy: In 2019, we advanced key facets of our long-term growth strategy in a year of transition. We have reshaped our portfolio of innovative medicines in recent years, focusing on products that can grow primarily through volume increases, rather than price increases, includingRepatha®,Aimovig®,Prolia®,EVENITY® and, most recently,Otezla®. Leveraging our industry-leading biologics manufacturing skills.skills, we have delivered our first biosimilars to the U.S. market,MVASI® (biosimilar bevacizumab (Avastin®)) andKANJINTI® (biosimilar trastuzumab (Herceptin®)), in 2019 (adding to our two successful biosimilar launches outside of the U.S. last year). We progressed our early oncology programs, includingAMG 510, our KRASG12C small molecule inhibitor, that has enrolled a potentially pivotal Phase 2 monotherapy study in advancednon-small cell lung cancer, began enrollment of colorectal cancer patients in a Phase 2 monotherapy study, and is also being investigated as a treatment for a variety of other solid tumors. Outside of oncology, we have also advanced our pipeline in our other therapeutic areas and await data fromtezepelumab for allergic andnon-allergic asthma,omecamtiv mecarbil for heart failure, and Otezla for mild to moderate psoriasis. And we are doing this while investingincreasingly well-positioned to take advantage of the growing demand for long-term growth, deployinginnovative healthcare globally, with our expanding presence in markets around the world, including China, where we have entered into a strategic oncology collaboration withBeiGene Ltd., and Japan. In 2019, we also continued to work on the construction of our second next-generation biomanufacturing facilities, expanding our global geographic reach, improving drug delivery systems, andmanufacturing facility in Rhode Island, building on our recent transformation successes to more efficiently bring our discoveries out of the lab and to patients worldwide. While investing in all these activities,success we have simultaneously maintainedhad with our first next-generation facility in Singapore; delivering the same output as a traditional plant, but with a much smaller environmental footprint. We continue to maintain a disciplined approach to capital allocation through which we invest in our future while also returning capital to stockholders. The consistent, strong execution of our strategy results in solving complex problems in biotechnology that benefit patients, building a long-lasting business, and generating long-term stockholder value.
Execution on Our Strategy in 2018: We launched several medicines, includingAimovig®*, the first calcitonin gene-related peptide (CGRP) inhibitor approved for the preventive treatment of migraine in adults,Parsabiv®, for secondary hyperparathyroidism, and our first two biosimilars, KANJINTI™ (biosimilar trastuzumab (Herceptin®)) andAMGEVITA™(biosimilar adalimumab (HUMIRA®)), in Europe. Recognizing the urgent need presented by cardiovascular disease, we also took significant actions in 2018 to address affordability challenges for patients who would benefit fromRepatha® (our medicine to dramatically reducelow-density lipoprotein (bad) cholesterol), making it available in the U.S. at a 60% reduction from the medicine’s original list price. We advanced our early oncology pipeline. We also broke ground on our new next-generation biomanufacturing plant in Rhode Island in 2018. This new plant will be the first of its kind in the U.S. and will use our proven next-generation biomanufacturing capabilities to reliably supply medicines and meet the need of every patient, every time. In the Compensation Discussion and Analysis section of this proxy, we further discuss our progress against our strategic prioritiesstrategy in 2018.2019.
Our Transformation:Commitment to Society:2018 was the capstone year for a set of ambitiousnon-GAAP financial commitments we made to our stockholders five years ago, including earnings per share growth, operating margin improvement, and return of capital. As we previously reported,strive to bring to marketfirst-in-class orbest-in-class medicines to treat serious illness and deliver a large effect size, we met and exceeded these targets. The larger goalbelieve that we are bringing the type of innovation that can address the challenges of our transformation, however, was to enhanceincreasingly older and more urban global population. How we achieve this aspiration is equally important since making a positive difference in the world is at the heart of what we do. As part of our ability to compete. And here too, we’ve made great progress. Over the past five years, we launched nine new products, including in two new therapeutic areas, expanded our global presence to approximately 100 countries, generated our largest ever number of innovative andfirst-in-class molecules in our pipeline, reduced our development cycle time by an average of approximately 36 months, expanded our industry-leading human genetics capabilities, established a biosimilars business, and deployed a first of its kind, highly-efficient, next-generation biologics manufacturing capability. While our transformation is not complete, we’re in a much better position than ever beforemission to serve patients, we take our responsibilities seriously with respect to the areas of environmental sustainability, social responsibility, and corporate governance (ESG). In addition to deliver long-term growth.a commitment to ethical business practices, our ESG efforts include integrating environmentally sustainable practices throughout our business, improving patient access to our medicines, supporting science education for the next generation of innovators, and enhancing the diversity and inclusiveness of our workforce.
Stockholder Engagement:We are also guided by the perspectives of our stockholders as expressed through their direct engagement with us throughout the year and at our Annual Meeting. Since our 20182019 annual meeting of stockholders, in addition to outreach by our executives and Investor Relations department to our investors owning approximately 58% of our outstanding shares, we have engaged in governance-focused outreach activities and discussions with the governance teams for stockholders comprising approximately 53%51% of our outstanding shares. Topics discussed included our business and financial performance, our environmental, sustainability,ESG programs, and governance programs, executive compensation (including its direct link to our business strategy), and product pricing.. Feedback received during these meetings is shared with the full Board of Directors and informs Board and committee decisions. We are eager to continue this valuable dialogue with our investors in the coming year.
We are grateful to our former Executive Vice President and Chief Financial Officer, David W. Meline, who retired as CFO at the end of 2019 for his significant and lasting contributions to Amgen. Peter H. Griffith joined us as our new CFO this year and his extensive financial and operational experience will benefit Amgen as we continue our efforts to serve more patients and drive long-term growth and stockholder value.
I look forward to sharing more about our Company at the Annual Meeting. In addition to the business to be transacted and described in the accompanying Notice of Annual Meeting of Stockholders, I will discuss recent developments during the past year, the substantial progress we made on our strategic priorities for 2018,2019, and respond to comments and questions.
On behalf of theour Board of Directors, I thank you for your participation and investment in Amgen. We look forward to seeing youthe Annual Meeting on May 21.19. As a final note, and also on behalf of theour Board of Directors, I would like to thank Frank Herringer,Rebecca M. Henderson, who is not standing forre-election this year, for his yearsher decade of wise counsel to and guidance forof Amgen.
Sincerely,
Robert A. Bradway
Chairman of the Board,
Chief Executive Officer and President
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Amgen Inc. One Amgen Center Drive Thousand Oaks, California 91320-1799 |
Notice of Annual Meeting of Stockholders
To be Held on May 21, 201919, 2020
To the Stockholders of Amgen Inc.:
Date and Time: | Tuesday, May | |||
Location: |
Stockholders or their proxyholders may participate, vote, and examine our list of stockholders at our Annual Meeting via the Internet atwww.virtualshareholdermeeting.com/AMGN2020 and using your control number. | |||
Record Date: | March | |||
Mail Date: | We intend to mail the Notice Regarding the Availability of Proxy Materials, or the proxy statement and proxy card, as applicable, on or about April | |||
| Items of Business: | ||||
1. | To elect | |||
2. | To hold an advisory vote to approve our executive compensation; | |||
3. | To ratify the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, | |||
| 4. | To consider one stockholder proposal, if properly presented at the Annual Meeting; and | |||
| To transact such other business as may properly come before the Annual Meeting or any continuation, postponement, or adjournment thereof. | |||
Attendance: | ||||
Voting:Your vote is important, regardless of the number of shares that you own. Whether or not you plan to attend the Annual Meeting, in person, it is important that your shares be represented and voted. Please read the Notice of Annual Meeting of Stockholders and proxy statement with care and follow the voting instructions to ensure that your shares are represented. By submitting your proxy promptly, you will save the Company the expense of further proxy solicitation. We encourage you to submit your proxy as soon as possible by Internet, by telephone, or by signing, dating, and returning all proxy cards or instruction forms provided to you.
By Order of the Board of Directors
Jonathan P. Graham
Secretary
Thousand Oaks, California
April 8, 20197, 2020
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Table of Contents
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| 1 | ||||
| 9 | ||||
| 17 | ||||
| 17 | ||||
| 18 | ||||
| 20 | ||||
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| 21 | ||||
| 21 | ||||
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| 22 | ||||
Process for Selecting Directors, Director Qualifications, and Board Diversity | 22 | |||
| 24 | ||||
| 25 | ||||
Governance Committee Processes and Procedures for Considering and Determining Director Compensation | 26 | |||
| 26 | ||||
| 27 | ||||
| 27 | |||
| 28 | ||||
| 28 | ||||
| 29 | ||||
| 30 | ||||
| 30 | ||||
| 31 | ||||
Our Commitment to Environmental Sustainability, Social Responsibility, and Human Capital Management | 31 | |||
| 34 | ||||
| 38 | ||||
| Compensation Discussion and Analysis | 38 | |||
| 38 | ||||
ï 20192020 Proxy Statement
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Proxy Statement Summary
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This summary contains highlights about our Company and the upcoming 20192020 Annual Meeting of Stockholders, or Annual Meeting. This summary does not contain all of the information that you should consider in advance of the meeting and we encourage you to read the entire proxy statement before voting.
20192020 Annual Meeting of Stockholders
Date and Time: | Tuesday, May | |
Location: |
Stockholders or their proxyholders may participate, vote, and examine our list of stockholders at our Annual Meeting via the Internet atwww.virtualshareholdermeeting.com/AMGN2020 and using your control number. | |
Record Date: | March | |
Mail Date: | We intend to mail the Notice Regarding the Availability of Proxy Materials, or the proxy statement and proxy card, as applicable, on or about April | |
Voting Matters and Board Recommendations
Matter | Our Board Vote Recommendation | |||
Management Proposals:
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Item 1:
| Election of
| FOR each Director Nominee
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Item 2:
| Advisory Vote to Approve Our Executive Compensation (page
| FOR
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Item 3:
| Ratification of Selection of Independent Registered Public Accountants (page
| FOR | ||
Stockholder Proposal: | ||||
Item 4: | Stockholder Proposal to Require an Independent Board Chair, if properly presented (page 93) | AGAINST
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ï 2020 Proxy Statement 1
Proxy Statement Summary |
How to Vote
| • By Internet: You may submit a proxy over the Internet by following the instructions on the website referred to in the Notice, proxy card, or voting instruction form mailed to you. You will need the control number that appears on your Notice, proxy card, or voting instruction form. | |
| • By Telephone: You may submit a proxy by telephone by following the instructions on the website referred to in the Notice, proxy card, or voting instruction form mailed to you. You will need the control number that appears on your Notice, proxy card, or voting instruction form. | |
| • By Mail:If you received a full paper set of materials, date and sign your proxy card or voting instruction form and mail it in the enclosed, postage-paid envelope. If you received a Notice, you may request a proxy card by following the instructions on your Notice. You do not need to mail the proxy card if you are | |
| • |
ï 20192020 Proxy Statement 1
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Proxy Statement Summary
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Item 1: Election of 1211 Nominees to the Board of Directors (Page 6)9)
Nominee | Independent | Age | | Director Since |
| Audit | | Governance and Nominating |
| Executive | | Compensation and Management Development |
| | Equity Award |
| | Corporate Responsibility and Compliance | ||||||||||||||||||||
Wanda M. Austin
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| ✓
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| 64
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| 2017
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| M
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| M
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| |||||||||||||||||||||||
Robert A. Bradway
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| 56
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| 2011
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| C
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| M
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| ||||||||||||||||||||||||||
Brian J. Druker
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| ✓
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| 63
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| 2018
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| M
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| M
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| |||||||||||||||||||||||
Robert A. Eckert
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| ✓
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| 64
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| 2012
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| M
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| M
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|
| C
|
|
| C
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| |||||||||||||||||
Greg C. Garland
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| ✓
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| 61
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| 2013
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| C
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| M
|
|
| M
|
|
| M
|
| |||||||||||||||||
Fred Hassan
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| ✓
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|
| 73
|
|
| 2015
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Rebecca M. Henderson
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| ✓
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| 58
|
|
| 2009
|
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| M
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| M
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| |||||||||||||||||||||||
Charles M. Holley, Jr.
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| ✓
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| 62
|
|
| 2017
|
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| C
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|
| M
|
|
| M
|
| ||||||||||||||||||||
Tyler Jacks
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| ✓
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| 58
|
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| 2012
|
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| M
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|
| M
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| |||||||||||||||||||||||
Ellen J. Kullman
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| ✓
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| 63
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| 2016
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| M
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| M
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Ronald D. Sugar
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| ✓
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| 70
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| 2010
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| M
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|
| M
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|
| C
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| ||||||||||||||||||||
R. Sanders Williams
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| ✓
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| 70
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| 2014
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| M
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| M
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Nominee | Independent | Age | | Director Since |
| Audit | | Governance and Nominating |
| Executive | | Compensation and Management Development |
| | Equity Award |
|
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Corporate Responsibility and Compliance |
| |||||||||||||||||||
Wanda M. Austin
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| ✓
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| 65
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| 2017
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| M
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| M
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| |||||||||||||||||||||||
Robert A. Bradway
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| 57
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| 2011
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| C
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| M
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| ||||||||||||||||||||||||||
Brian J. Druker
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| ✓
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| 64
|
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| 2018
|
|
| M
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|
| M
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| |||||||||||||||||||||||
Robert A. Eckert
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| ✓
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| 65
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| 2012
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| M
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|
| M
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| C
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| ||||||||||||||||||||
Greg C. Garland
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| ✓
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| 62
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| 2013
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| C
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|
| M
|
|
| M
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| ||||||||||||||||||||
Fred Hassan
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| ✓
|
|
| 74
|
|
| 2015
|
|
| M
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|
| M
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| |||||||||||||||||||||||
Charles M. Holley, Jr.
|
| ✓
|
|
| 63
|
|
| 2017
|
|
| C
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|
| M
|
|
| M
|
| ||||||||||||||||||||
Tyler Jacks
|
| ✓
|
|
| 59
|
|
| 2012
|
|
| M
|
|
| M
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| |||||||||||||||||||||||
Ellen J. Kullman
|
| ✓
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| 64
|
|
| 2016
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|
| M
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|
| M
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| |||||||||||||||||||||||
Ronald D. Sugar
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| ✓
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|
| 71
|
|
| 2010
|
|
| M
|
|
| M
|
|
| C
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| ||||||||||||||||||||
R. Sanders Williams
|
| ✓
|
|
| 71
|
|
| 2014
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| M
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| M
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| |||||||||||||||||||||||
| “C” | indicates Chair of the committee. |
| “M” | indicates member of the committee. |
Director* and Corporate Governance Highlights and Best Practices
| * | For our director nominees. |
2 ï 20192020 Proxy Statement 3
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Proxy Statement Summary
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We Have Implemented Governance Best Practices
We continuously monitor developments and best practices in corporate governance and consider stockholder feedback when enhancing our governance structures. Below are highlights of our key governance practices:
Effective Board Leadership and Independent Oversight |
✓ Highly Independent Board –
✓ Strong Refreshment Practices With 5 New Directors Since 2015 – Average Board tenure of approximately
✓ Annual Anonymous Board and Committee Evaluation Process(pages
✓ All Directors Meet Our Board of Directors Guidelines for Director Qualifications and Evaluations(Appendix A)
✓ Robust Lead Independent Director Role(
✓ Corporate Responsibility and Compliance Committee(page
✓ Enterprise Risk Management Program and Annual Detailed Compensation Risk Analysis – overseen by Board and Compensation and Management Development Committee, respectively(pages
| |||
Focus on Stockholder Rights |
✓ Proxy Access(pages
✓ Majority Voting Standard for Director Elections(pages
✓
✓
✓ No Supermajority Vote Provisions in Certificate of Incorporation or Bylaws(page
✓ No Poison Pill(page
| |||
History of Transparency and Accountability |
✓ Significant Stock Ownership Requirements for Officers and Directors(pages
✓ Regular Engagement With Stockholders to Seek Feedback (page
✓ We Continue to Seek Mechanisms to Lower the Cost Burden on Society of Serious Diseases
✓ We Have Demonstrated our Commitment to Environmentally Responsible Operations, Improving Patient Access to Medicines, Science Education, and our Community (
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE
| ||||
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| * | Who meet the requirements set forth in our Restated Certificate of Incorporation or our Amended and Restated |
20192020 Proxy Statement 3
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Proxy Statement Summary
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Item 2: Advisory Vote to Approve Our Executive
Compensation (Page 28)34)
2018 Total Target DirectWe Have Implemented Compensation MixBest Practices
A significant majority of each Named Executive Officer’s, or NEOs, compensation is at-risk and dependent on our performance and execution of our strategic priorities.
We use median values as the reference point for each element of compensation at all levels, including our NEOs. We consider performance, job scope, and contribution in our final pay decisions.
Our compensation program is directly linked to our performance and strategy. Each year, our Compensation and Management Development Committee approves Company performance goals under our annual cash incentive programs that are designed to focus our staff on delivering financial and operational objectives to drive annual performance, advance strategic priorities, and position us for longer-term success.
80% of our annual long-term incentive, or LTI, equity award grants are performance-based, aligning compensation with long-term value creation for our stockholders. Three-year performance units comprise 50% of our LTI equity award grants for the 2016-2018 performance period and the goal design and all measurement targets are established at the beginning of the three-year performance period. Our 2016-2018 performance units were earned for a performance period ending December 31, 2018, based on the Company’s performance on three equally weighted annualnon-Generally Accepted Accounting Principles, ornon-GAAP, operating measures of earnings per share, or EPS, growth, operating margin, and operating expense as measured against thepre-established targets for each of the three years.
What we do |
|
| ✓ | Recoupment in the |
| ✓ | Clawback policy tied to financial restatement |
| ✓ | Robust stock ownership and retention guidelines |
| ✓ | Minimum vesting periods for equity compensation |
| ✓ | Long-term performance-based equity awards (80% of total target equity) |
| ✓ | Independent compensation consultant |
What we don’t do |
| ⨯ | No hedging or pledging |
| ⨯ | Nore-pricing or backdating |
| ⨯ | No taxgross-ups (except in connection with relocation) |
| ⨯ | No single-trigger for stock options and restricted stock units in the event of a change of control |
| ⨯ | No excessive perks |
| ⨯ | No employment agreements |
| ⨯ | No dividends paid on unvested equity |
| ⨯ | No defined benefit pension or supplemental executive |
NEO Compensation is Dependent on Our Performance
• A significant amount of each Named Executive Officer’s, or NEOs, compensation isat-risk and dependent on our performance and execution of our • We use median values as the reference point for each element of compensation at all levels, including our NEOs. We consider performance, job scope, and | 2019 Total Target Direct Compensation Mix
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4 ï 20192020 Proxy Statement 5
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Proxy Statement Summary
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20182019 Annual and Long-Term Awards Reflect Performance AgainstPre-Established Goals and Measures
2018 Annual Cash Incentive Program
| 2016-2018 Long-Term Incentive Performance Award Payout
| |||||||||||||||
2019 Annual Cash Incentive Program
| 2019 Annual Cash Incentive Program
| 2017-2019 Long-Term Incentive Performance Award Payout
| ||||||||||||||
Our annual cash incentive program is designed to focus our staff on delivering financial and operational objectives to drive annual performance, advance strategic priorities, and position us for long-term success.
| Our annual cash incentive program is designed to focus our staff on delivering financial and operational objectives to drive annual performance, advance strategic priorities, and position us for long-term success.
| 80% of our annual long-term incentive, or LTI, equity award grants are performance-based, aligning compensation with long-term value creation for our stockholders. Three-year performance units comprise 50% of our LTI equity award grants, with the goal design and all measurement targets established at the beginning of the three-year performance period. | ||||||||||||||
Goal
| Weighting
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% of Target Earned
|  | Weighting
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% of Target Earned
|  | ||||||||||
Financial Performance
|
Financial Performance
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Financial Performance
| ||||||||||||||
Revenues
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| 30%
|
| 224.7%
|
| 30%
|
| 177%
| ||||||||
Non-GAAP Net Income(1)
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| 30%
|
| 186.5%
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| 30%
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| 168%
| ||||||||
Progress Innovative Pipeline
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Progress Innovative Pipeline
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Progress Innovative Pipeline
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Advance Early Pipeline
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| 5%
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| 113.9%
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| 10%
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| 100%
| ||||||||
Execute Key Clinical Studies and Regulatory Filings
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| 20%
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| 120.8%
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| 20%
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| 80%
| ||||||||
Deliver Annual Priorities
|
Deliver Annual Priorities
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Deliver Annual Priorities
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Execute Critical Launches and Long-Term Commercial Objectives
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| 10%
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| 71.3%
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| 5%
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| 77%
| ||||||||
Achieve Transformation Objectives
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| 5%
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| 124.2%
| ||||||||||||
Achieve Productivity Objectives
|
| 5%
|
| 107%
| ||||||||||||
Final Score
|
| Achieved 166.6%
| |
| Achieved 138.9%
| | ||||||||||
| (1) | Non-GAAP net income for purposes of the |
| (2) | The operating measures of the |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE ADVISORY RESOLUTION INDICATING THE APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
|
6 ï 2020 Proxy Statement
Proxy Statement Summary |
Item 3: Ratification of Selection of Independent Registered
Public Accountants (Page 91)90)
The Audit Committee of the Board has selected Ernst & Young LLP, or Ernst & Young,EY, as our independent registered public accountants for the fiscal year ending December 31, 2019.2020.
Ernst & YoungEY has served as our independent registered public accounting firm since the Company’s inception in 1980.
Each year, the Audit Committee evaluates the qualifications and performance of the Company’s independent registered public accountants and determines whether tore-engage the current independent registered public accountants.
Based on this evaluation, the Audit Committee believes that the continued retention of Ernst & YoungEY is in the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.
|
Item 4: Stockholder Proposal (Page 93)
Stockholder proposal to require an independent Board Chair, if properly presented.
| • | Independent Oversight. Our Company has numerous mechanisms that ensure independent oversight of the Company’s affairs and that facilitate communication with, and independent evaluation of, senior management, including: |
| - | An active lead independent director elected annually by and from the independent directors with a robust set of duties and authority outlined below; |
| - | Strong Board and committee involvement to provide sound and robust oversight of management; |
| - | Regular communication between the lead independent director, the independent directors, and Robert A. Bradway, keeping Mr. Bradway apprised of any concerns, issues, or determinations made during the independent sessions, and consulting with Mr. Bradway on other matters pertinent to the Company and the Board; |
| - | Diverse, experienced, and skilled directors, with ten of our eleven director nominees independent as defined by The NASDAQ Stock Market listing standards and the requirements of the Securities and Exchange Commission; |
| - | All members of the Board’s key committees are independent; and |
| - | A meeting of the independent directors is scheduled at every regular Board meeting and the independent directors meet in executive session without Mr. Bradway to review Company performance, management effectiveness, proposed programs and transactions, and the Board meeting agenda items. |
| • | Leadership Structure.Our governance documents give the Board discretion in determining whether to separate or combine the roles of the Chairman and Chief Executive Officer. This flexibility permits the Board to choose a leadership structure that can be tailored to the strengths of the Company’s officers and directors and to best address our evolving and highly complex business. |
ï 20192020 Proxy Statement 57
Proxy Statement Summary |
| • | Annual Evaluation of Leadership Structure.The Board conducts annual evaluations of the Company’s leadership structure and determined that the Company and its stockholders are best served at this time by having Mr. Bradway serve as both Chairman and Chief Executive Officer, coupled by a separate active lead independent director, currently served by Robert A. Eckert. |
Our Lead Independent Director Responsibilities The lead independent director’s responsibilities outlined in the Amgen Board of Directors Corporate Governance Principles include: - Approving meeting agendas for the Board; - Assuring that there is sufficient time for discussion of all meeting agenda items; - Previewing the information to be provided to the Board; - Having the authority to call meetings of the independent directors; - Organizing and leading the Board’s evaluation of the CEO; - Serving as a liaison between the Chairman and the independent directors; - Leading the Board’s annual self-assessment; - Ensuring that he/she is available for consultation and direct communication, if requested by major stockholders; and - Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors. In addition to the responsibilities outlined above, the lead independent director: - Meets with the Chairman prior to each regular meeting of the Board and its committees to discuss, provide input on, and approve the agendas; - With the Chairman, determines presenters for attendance at Board meetings; - Hasone-on-one discussions with each independent director, including as part of the Board’s annual evaluation process; - Attends all committee meetings, including those committees for which he is not a member (at his discretion) and is provided with access to all committee materials; - Has the authority to engage independent consultants; - Is regularly apprised of inquiries from stockholders; - Interviews Board candidates; and - Has an increased role in crisis management, as appropriate. |
Please see “Leadership Structure” in the Corporate Governance section for a full discussion of our current leadership structure and lead independent director responsibilities.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” THE STOCKHOLDER PROPOSAL. |
8 ï 2020 Proxy Statement
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Item 1 — Election of Directors
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Election of Directors
Under our governinggovernance documents, the Board of Directors, or Board, has the power to set the number of directors from time to time by resolution. We currently have 1312 authorized directors serving on our Board. Based upon the recommendation of our Governance and Nominating Committee, the Board has nominated each of the director nominees set forth below to stand forre-election as a director, in each case for aone-year term expiring at our 20202021 annual meeting of stockholders and until his or her successor is elected and qualified, or until his or her earlier retirement, resignation, disqualification, removal, or death. Frank C. Herringer will retire from our Board and hasRebecca M. Henderson is not been nominatedstanding forre-election at the 20192020 Annual Meeting of Stockholders, or Annual Meeting.Meeting, after ten years of valuable service to the Company.
The Board has fixed the authorized number of directors at 1211 to be effective as of the close of the Annual Meeting and the election by stockholdersofthenomineesstandingforelection.Eachnomineehasagreedto serve if elected and the Board has no reason to believe that any nominee will be unable to serve. However, if any nominee should
become unavailable for election prior to the Annual Meeting, the proxies will be voted in favor of the election of a substitute nominee or nominees proposed by the Board or, alternatively, the number of directors may be reduced accordingly by the Board. Vacancies on the Board (including any vacancy created by an increase in the size of the Board) may be filled only by a majority of the directors remaining in office, even though less than a quorum of the Board. A director elected by the Board to fill a vacancy (including a vacancy created by an increase in the size of the Board) will serve until the next annual meeting of stockholders and until such director’s successor is elected and qualified, or until such director’s earlier retirement, resignation, disqualification, removal, or death.
The independent members of the Board have elected Robert A. Eckert to continue to serve as our lead independent director, subject to hisre-election to the Board by our stockholders at the Annual Meeting. As lead independent director, Mr. Eckert will continue to have the specific and significant duties as discussed under “Corporate Governance.”
Nominees to the Board
Nominee | Independent | Age | | Director Since |
| Audit | | Governance and Nominating |
| Executive | | Compensation and Management Development |
| | Equity Award |
| | Corporate Responsibility and Compliance | ||||||||||||||||||||
Wanda M. Austin
|
| ✓
|
|
| 64
|
|
| 2017
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Robert A. Bradway
|
| 56
|
|
| 2011
|
|
| C
|
|
| M
|
| ||||||||||||||||||||||||||
Brian J. Druker
|
| ✓
|
|
| 63
|
|
| 2018
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Robert A. Eckert
|
| ✓
|
|
| 64
|
|
| 2012
|
|
| M
|
|
| M
|
|
| C
|
|
| C
|
| |||||||||||||||||
Greg C. Garland
|
| ✓
|
|
| 61
|
|
| 2013
|
|
| C
|
|
| M
|
|
| M
|
|
| M
|
| |||||||||||||||||
Fred Hassan
|
| ✓
|
|
| 73
|
|
| 2015
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Rebecca M. Henderson
|
| ✓
|
|
| 58
|
|
| 2009
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Charles M. Holley, Jr.
|
| ✓
|
|
| 62
|
|
| 2017
|
|
| C
|
|
| M
|
|
| M
|
| ||||||||||||||||||||
Tyler Jacks
|
| ✓
|
|
| 58
|
|
| 2012
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Ellen J. Kullman
|
| ✓
|
|
| 63
|
|
| 2016
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Ronald D. Sugar
|
| ✓
|
|
| 70
|
|
| 2010
|
|
| M
|
|
| M
|
|
| C
|
| ||||||||||||||||||||
R. Sanders Williams
|
| ✓
|
|
| 70
|
|
| 2014
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Nominee | Independent | Age | | Director Since |
| Audit | | Governance and Nominating |
| Executive | | Compensation and Management Development |
| | Equity Award |
| | Corporate Responsibility and Compliance | ||||||||||||||||||||
Wanda M. Austin
|
| ✓
|
|
| 65
|
|
| 2017
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Robert A. Bradway
|
| 57
|
|
| 2011
|
|
| C
|
|
| M
|
| ||||||||||||||||||||||||||
Brian J. Druker
|
| ✓
|
|
| 64
|
|
| 2018
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Robert A. Eckert
|
| ✓
|
|
| 65
|
|
| 2012
|
|
| M
|
|
| M
|
|
| C
|
| ||||||||||||||||||||
Greg C. Garland
|
| ✓
|
|
| 62
|
|
| 2013
|
|
| C
|
|
| M
|
|
| M
|
| ||||||||||||||||||||
Fred Hassan
|
| ✓
|
|
| 74
|
|
| 2015
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Charles M. Holley, Jr.
|
| ✓
|
|
| 63
|
|
| 2017
|
|
| C
|
|
| M
|
|
| M
|
| ||||||||||||||||||||
Tyler Jacks
|
| ✓
|
|
| 59
|
|
| 2012
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Ellen J. Kullman
|
| ✓
|
|
| 64
|
|
| 2016
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
Ronald D. Sugar
|
| ✓
|
|
| 71
|
|
| 2010
|
|
| M
|
|
| M
|
|
| C
|
| ||||||||||||||||||||
R. Sanders Williams
|
| ✓
|
|
| 71
|
|
| 2014
|
|
| M
|
|
| M
|
| |||||||||||||||||||||||
| “C” | indicates Chair of the committee. |
| “M” | indicates member of the committee. |
6 ï 20192020 Proxy Statement 9
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Item 1 — Election of Directors
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Summary of Director Nominee Core Experiences and Skills
Our Board possesses a deep and broad set of skills and experiences that facilitate strong oversight and strategic direction for a leading global innovator in biotechnology. The following chart summarizes the competencies of each director nominee to be represented on our Board. The details of each director’s competencies are included in each director’s profile.
Experience / Skills Austin Bradway Druker Eckert Garland Hassan Henderson Holley Jacks Kullman Sugar Williams Healthcare Industry, Providers and Payers Science/Technology Public Company CEO/COO/CFO Regulatory Compliance Financial/Accounting Government/Public Policy International
The lack of a “✓” for a particular item does not mean that the director does not possess that qualification, characteristic, skill, or experience. Each of our Board members have experience and/or skills in the enumerated areas, however, the✓ is designed to indicate that a director has particular strength in that area.
| * | For our director nominees. |
20192020 Proxy Statement 7
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Item 1 — Election of Directors
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NAMED NOMINEES. PROXIES WILL BE VOTED “FOR” THE ELECTION OF THE NOMINEES UNLESS OTHERWISE SPECIFIED.
Set forth below is biographical information for each nominee and a summary of the specific qualifications, attributes, skills, and experiences which led our Board to conclude that each nominee should serve on the Board at this time. All of our directors meet the qualifications and skills of our Amgen Inc. Board of Directors Guidelines for Director Qualifications and Evaluations included in this proxy statement asAppendix A. There are no family relationships among any of our directors or among any of our directors and our executive officers.
Wanda M. Austin
Director since: 2017
Age:
Committees: • Audit • Other Public Company Boards: • Chevron Corporation • Virgin Galactic Holdings, Inc.
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Wanda M. Austin
Dr. Austin served as Interim President of the University of Southern California from August 2018 until June 2019. She has served as an Adjunct Research Professor at the University of Southern California’s Viterbi School of Engineering since 2007. She is theco-founder of MakingSpace, Inc., where she serves as a motivational speaker on STEM education. Dr. Austin has been a director of Chevron Corporation, a petroleum, exploration, production and refining company, since 2016, serving on its Board Nominating and Governance Committee and chairing its Public Policy Committee. Dr. Austin has been a director of Virgin Galactic Holdings, Inc., a commercial space flight company, since October 2019 and is a member of its Audit Committee and Safety Committee, and chair of its Compensation Committee. Dr. Austin is a trustee of the University of Southern California and previously served on the boards of directors of the National Geographic Society and the Space Foundation. Dr. Austin received an undergraduate degree from Franklin & Marshall College, a master’s degree from the University of Pittsburgh, and a doctorate from the University of Southern California. She is a member of the National Academy of Engineering.
Qualifications
The Board concluded that Dr. Austin should serve on the Board based on her leadership and management experience as a chief executive officer, her extensive background in science, technology, and government affairs in a highly regulated industry, and her public board experience. |
Robert A. Bradway
Director since:2011
Age:
Committees: • Equity Award • Executive (Chair)
Other Public Company Boards: • The Boeing Company
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Robert A. Bradway has served as our director since 2011 and Chairman of the Board since 2013. Mr. Bradway has been our President since 2010 and Chief Executive Officer since 2012. From 2010 to 2012, Mr. Bradway served as our Chief Operating Officer. Mr. Bradway joined Amgen in 2006 as Vice President, Operations Strategy and served as Executive Vice President and Chief Financial Officer from 2007 to 2010. Prior to joining Amgen, he was a Managing Director at Morgan Stanley in London where, beginning in 2001, he had responsibility for the firm’s banking department and corporate finance activities in Europe.
Mr. Bradway has been a director of The Boeing Company, an aerospace company and manufacturer of commercial airplanes, defense, space and securities systems, since 2016, serving on its Audit and Finance Committees. From 2011 to
Qualifications
The Board concluded that Mr. Bradway should serve on the Board based on his thorough knowledge of all aspects of our business, combined with his leadership and management skills having previously served as our President and Chief Operating Officer and as our Chief Financial Officer. |
8 ï 20192020 Proxy Statement 11
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Item 1 — Election of Directors
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Brian J. Druker
Director since:2018
Age:
Committees: • • Corporate Responsibility and Compliance
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Brian J.
Dr. Druker has served on the scientific advisory
Dr. Druker has received numerous awards, including the Lasker-DeBakey Clinical Research Award in 2009, the Japan Prize in Healthcare and Medical Technology in 2012, the Albany Medical Center Prize in 2013, |
Qualifications
The Board concluded that Dr. Druker should serve on the Board based on his extensive scientific research and expertise leading an important academic institution, conducting highly significant research in the area of oncology, and directly managing the care of cancer patients.
Robert A. Eckert
Lead Independent Director
Director since:2012
Age:
Committees: • Compensation and Management Development
• Executive • Governance and Nominating
Other Public Company Boards: • Levi Strauss & Co. • McDonald’s Corporation • Uber Technologies, Inc.
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Robert A. Eckert is our lead independent director. Mr. Eckert has been an Operating Partner at Friedman Fleischer & Lowe, a private equity firm, since 2014. Mr. Eckert was the Chief Executive Officer of Mattel, Inc., a toy design, manufacture and marketing company, having held this position from 2000 through 2011, and its Chairman of the Board from 2000 through 2012. He was President and Chief Executive Officer of Kraft Foods Inc., a consumer packaged food and beverage company, from 1997 to 2000, Group Vice President from 1995 to 1997, President of the Oscar Mayer Foods Division from 1993 to 1995 and held various other senior executive and other positions from 1977 to 1992.
Mr. Eckert has been a director of McDonald’s Corporation, a company which franchises and operates McDonald’s restaurants in the global restaurant industry, since 2003, serving as the Chair of the Public Policy and Strategy Committee and a member of the Executive and Governance Committees. Mr. Eckert also has served as a director of Levi Strauss & Co., a jeans and casual wear manufacturer, since 2010, serving as Chair of the Compensation Committee and a member of the Nominating, Governance and Corporate Citizenship Committee. Levi Strauss & Co. was a privately-held company until March 2019 when it became publicly traded. In March 2020, Mr. Eckert was appointed a director of Uber Technologies, Inc., a personal mobility, meal delivery and logistics technology platform, serving on its Compensation and Nominating and Governance Committees. Mr. Eckert was a director of Smart & Final Stores, Inc., a warehouse store, from 2013 until 2014 prior to it becoming a publicly-traded company. He was appointed director of Eyemart Express Holdings LLC, a privately-held eyewear retailer and portfolio company of Friedman Fleischer & Lowe, in 2015. Mr. Eckert is on the Global Advisory Board of the Kellogg School of Management at Northwestern University and serves on the Eller College National Board of Advisors at the University of Arizona. Mr. Eckert received an undergraduate degree from the University of Arizona and a master’s degree in business administration from the Kellogg School of Management at Northwestern University.
Qualifications
The Board concluded that Mr. Eckert should serve on our Board because of Mr. Eckert’s long-tenured experience as a chief executive officer and director of large public companies, his broad international experience in marketing and business development, and his valuable leadership experience.
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20192020 Proxy Statement 9
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Item 1 — Election of Directors
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Greg C. Garland
Director since:2013
Age:
Committees: • Compensation and Management Development
• Executive • Governance and Nominating (Chair)
Other Public Company Boards: • Phillips 66(1)
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Greg C. Garland is the Chairman and Chief Executive Officer of Phillips 66,
Qualifications
The Board concluded that Mr. Garland should serve on our Board because of Mr. Garland’s experience as a chief executive officer and his over 30 years of international experience in a highly regulated industry.
|
| (1) | Mr. Garland also serves as Chairman and Chief Executive Officer of Phillips 66 Partners LP, a master limited partnership and wholly-owned subsidiary of Phillips 66 without any employees. |
Fred Hassan
Director since:2015
Age:
Committees: • Audit • Compensation and Management Development
Other Public Company Boards: • Intrexon Corporation
Audit Committee financial expert |
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Fred Hassan is Director at Warburg Pincus LLC, a global private equity investment institution, since 2018. Mr. Hassan was Special Limited Partner at Warburg Pincus LLC from 2017 to 2018 and Partner and Managing Director from 2011 to 2017 and, prior to that, served as Senior Advisor from 2009 to 2010. Mr. Hassan was Chairman of the Board and Chief Executive Officer of Schering-Plough Corporation from 2003 to 2009. Prior to this, Mr. Hassan was Chairman, President and Chief Executive Officer of Pharmacia Corporation, from 2001 to 2003. Before assuming these roles, he had served as President and Chief Executive Officer of Pharmacia Corporation from its creation in 2000 as a result of the merger of Pharmacia & Upjohn, Inc. with Monsanto Company. He was President and Chief Executive Officer of Pharmacia & Upjohn, Inc. beginning in 1997. Mr. Hassan previously held senior positions with Wyeth (formerly known as American Home Products), including that of Executive Vice President with responsibility for its pharmaceutical and medical products businesses, and served as a member of the board from 1995 to 1997. Prior to that, Mr. Hassan held various roles at Sandoz Pharmaceuticals and headed its U.S. pharmaceuticals businesses.
Mr. Hassan has been a director of Intrexon Corporation, a synthetic biology company, since 2016, serving on its Compensation Committee. Mr. Hassan was a director of Time Warner Inc., a media company, from 2009 until its acquisition by AT&T Inc., a provider of communications and digital entertainment services, in 2018.Mr. Hassan was a director of Avon Products, Inc., a manufacturer and marketer of beauty and related products, from 1999 until 2013 and served on its Compensation and Management Development, Nominating and Corporate Governance and Audit Committees, as lead independent director from 2009 to 2012, and Chairman of the Board between January and April 2013. Mr. Hassan was Chairman of the Board of Bausch & Lomb, from 2010 until its acquisition by Valeant Pharmaceuticals International, Inc., a pharmaceutical company, in 2013. Mr. Hassan served on the board of directors and the Compensation and Audit Committees of Valeant Pharmaceuticals International, Inc. from 2013 to 2014. Mr. Hassan received an undergraduate degree from Imperial College of Science and Technology, University of London and a master’s degree in business administration from Harvard Business School.
Qualifications
The Board concluded that Mr. Hassan should serve on the Board based on his global experience as a public company chief executive officer, his particular knowledge and experience in the healthcare and pharmaceutical industries, including overseeing businesses with significant research and development operations, his diversified financial and business expertise, as well as prior public company board experience. Given his financial and leadership experience, Mr. Hassan has been determined to be an Audit Committee financial expert by our Board.
10 ï 20192020 Proxy Statement 13
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Item 1 — Election of Directors
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Charles M. Holley, Jr.
Director since:2017
Age:
Committees: • Audit (Chair) • • Other Public Company Boards: • Carrier Global Corporation • Phillips 66
Audit Committee financial expert
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Charles M. Holley, Jr. is the former Executive Vice President and Chief Financial Officer forWal-Mart Stores, Inc., or Walmart, where he served from 2010 to 2015 and as Executive Vice President
Mr. Holley has been a director of Phillips 66, an energy manufacturing and logistics company, since October 2019 and serves on the Audit and Finance, and Public Policy Committees. In connection with the 2020 spin-off from United Technologies Corporation of Carrier Global Corporation, a provider of heating, ventilating, air conditioning (HVAC), refrigeration, fire, and security solutions, Mr. Holley has been appointed as a director of Carrier. He serves on the Advisory Council for the McCombs School of Business at the University of Texas at Austin and the University of Texas Presidents’
Qualifications
The Board concluded that Mr. Holley should serve on the Board based on his experience as a chief financial officer of a global public company, his financial acumen, and his management and leadership skills. Given his financial and leadership experience, Mr. Holley has been determined to be an Audit Committee financial expert by our Board. |
ï 2019 Proxy Statement 11
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Tyler Jacks
Director since:2012
Age:
Committees:
• Compensation and Management Development • Corporate Responsibility and Compliance
Other Public Company Boards: • Thermo Fisher Scientific, Inc.
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Tyler Jacks joined the faculty of Massachusetts Institute of Technology, or MIT, in 1992 and is currently the David H. Koch Professor of Biology and director of the David H. Koch Institute for Integrative Cancer Research, which brings together biologists and engineers to improve detection, diagnosis and treatment of cancer, a position he has held since 2007. Dr. Jacks has been an investigator with the Howard Hughes Medical Institute, a nonprofit medical research organization, since 1994.
Dr. Jacks has been a director of Thermo Fisher Scientific, Inc., a life sciences supply company, since 2009, serving on its Strategy and Finance Committee and scientific advisory board and chairing its Science and Technology Committee. In 2006, heco-founded T2 Biosystems, Inc., a biotechnology company, and served on its scientific advisory board until 2013. Dr. Jacks has served on the scientific advisory board of SQZ Biotech, a privately-held biotechnology company, since 2015. Dr. Jacks served on the scientific advisory board of Aveo Pharmaceuticals Inc., a biopharmaceutical company, from 2001 until 2013. In 2015, Dr. Jacks founded Dragonfly Therapeutics, Inc., a privately-held biopharmaceutical company, and serves as Chair of its scientific advisory board. He was appointed to the National Cancer Advisory Board, which advises and assists the Director of the National Cancer Institute with respect to the National Cancer Program, in 2011 and served as Chair until 2016. In 2016, Dr. Jacks was named to a blue ribbon panel of scientists and advisors established as a working group of the National Cancer Advisory Board and served asco-Chair advising the Cancer MoonshotSM Task Force. Dr. Jacks was a director of MIT’s Center for Cancer Research from 2001 to 2007 and received numerous awards including the Paul Marks Prize for Cancer Research and the American Association for Cancer Research Award for Outstanding Achievement. He was elected to the National Academy of Sciences as well as the National Academy of Medicine in 2009 and received the MIT Killian Faculty Achievement Award in 2015. Dr. Jacks received an undergraduate degree from Harvard University and his doctorate from the University of California, San Francisco. |
Qualifications
The Board concluded that Dr. Jacks should serve on the Board based on his extensive scientific expertise relevant to our industry, including his broad experience as a cancer researcher, pioneering uses of technology to study cancer-associated genes, and service on several scientific advisory boards and membership in the National Cancer Advisory Board.
14 ï 2020 Proxy Statement
Item 1 — Election of Directors |
Ellen J. Kullman
Director since: 2016
Age:
Committees: • Audit • Governance and Nominating
Other Public Company Boards: • Dell Technologies Inc. • Goldman Sachs Group, Inc.
Audit Committee financial expert
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Ellen J. Kullman was appointed President and Chief Executive Officer of Carbon, Inc., or Carbon, a privately-held 3D printing company, in November 2019, and has served as a director of Carbon since 2016. She is the former President, Chair and Chief Executive Officer of E.I. du Pont de Nemours and Company, or DuPont, a science and technology-based company, where she served from 2009 to 2015. Prior to this, Ms. Kullman served as President of DuPont from 2008 to 2009. From 2006 through 2008, she served as Executive Vice President of DuPont. Prior to that, Ms. Kullman was Group Vice President, DuPont Safety and Protection. Ms. Kullman has been a director of
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Qualifications
The Board concluded that Ms. Kullman should serve on the Board based on her lengthy global experience as a public company chief executive officer and board chair at both public and private companies, her management and leadership skills, and her experience with scientific operations, all of which provide valuable insight into the operations of our Company. Given her leadership and financial experience, Ms. Kullman has been determined to be an Audit Committee financial expert by our Board.
12 ï 2019 Proxy Statement
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Ronald D. Sugar
Director since:2010
Age:
Committees: • Corporate Responsibility and Compliance (Chair) • Executive • Governance and Nominating
Other Public Company Boards: • Air Lease Corporation (will not be standing forre-election) • Apple Inc. • Chevron Corporation • Uber Technologies, Inc.
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Ronald D. Sugar is the retired Chairman of the Board and Chief Executive Officer of Northrop Grumman Corporation, a global aerospace and defense company, having held these posts from 2003 through 2009.
Dr. Sugar has been a director of Chevron Corporation, a petroleum, exploration, production and refining company, since 2005, serving as the lead director and on the Management Compensation Committee and chairing the Board Nominating and Governance Committee. Dr. Sugar has been a director of Apple Inc., a manufacturer and seller of, among other things, personal computers, mobile communication and media devices, since 2010, chairing the Audit and Finance Committee. Dr. Sugar has been a director of Air Lease Corporation, an aircraft leasing company, since 2010, chairing the Compensation Committee and serving on the Nominating and Corporate Governance Committee, and will not be standing for election to the board of Air Lease Corporation at the next annual meeting of stockholders expected to occur in May 2020. Dr. Sugar has been a director of Uber Technologies, Inc., a personal mobility, meal delivery and logistics technology platform, since 2018, serving as the Chair of the board of directors and chairing the Nominating and Governance Committee and serving on the Compensation Committee. Since 2010, he has been a senior advisor to Ares Management LLC, a privately-held asset manager and registered investment advisor. In 2014, Dr. Sugar joined the Temasek Americas Advisory Panel of Temasek Holdings (Private) Limited, a privately-held investment company based in Singapore. Dr. Sugar is a member of the National Academy of Engineering, trustee of the University of Southern California, member of the UCLA Anderson School of Management Board of
Qualifications
The Board concluded that Dr. Sugar should serve on our Board because |
ï 2020 Proxy Statement 15
Item 1 — Election of Directors |
R. Sanders Williams
Director since:2014
Age:
Committees: • Corporate Responsibility and Compliance • Governance and Nominating
Other Public Company Boards: • Laboratory Corporation of America Holdings
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R. Sanders Williams is the President Emeritus of Gladstone Institutes, anon-profit biomedical research enterprise, having served in this position since 2018, and was the Chief Executive Officer of Gladstone Foundation, anot-for-profit organization supporting the Gladstone Institutes during 2018. Dr. Williams has been a Professor of Medicine at the University of California, San Francisco since 2010, and Professor of Medicine at Duke University since 2018. Dr. Williams was both President of Gladstone Institutes and its Robert W. and Linda L. Mahley Distinguished Professor of Medicine, from 2010 to 2017. Prior to this, Dr. Williams served as Senior Vice Chancellor of the Duke University School of Medicine from 2008 to 2010 and Dean of the Duke University School of Medicine from 2001 to 2008. He was the founding Dean of theDuke-NUS Graduate Medical School, Singapore, from 2003 to 2008 and served on its Governing Board from 2003 to 2010. From 1990 to 2001, Dr. Williams was Chief of Cardiology and Director of the Ryburn Center for Molecular Cardiology at the University of Texas, Southwestern Medical Center.
Dr. Williams has been a director of the Laboratory Corporation of America Holdings, a diagnostic technologies company, since 2007, serving on the Audit |
Qualifications
The Board concluded that Dr. Williams should serve on the Board because of his broad medical and scientific background, including his leadership roles in domestic and academic science settings, his deep experience in cardiology, oversight of governance of multi-hospital healthcare provider systems, leadership and development of international medical programs in Asia, and prior industry board experience.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE ABOVE 1211 NAMED NOMINEES.
20192020 Proxy Statement 13
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Corporate Governance
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Board of Directors Corporate Governance Highlights
Our Board of Directors, or Board, is governed by our Amgen Board of Directors Corporate Governance Principles which are amended from time to time to incorporate certain current best practices in corporate governance. Our Corporate Governance Principles may be found on our website atwww.amgen.com and are available in print upon written request to the Company’s Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799. The Board’s corporate governance practices and stockholder rights include the following:
Board Governance Practices
| • | Lead Independent Director. The independent members of the Board elect a lead independent director on an annual basis. The lead independent director has robust responsibilities and authorities as discussed below. Robert A. Eckert currently serves as our lead independent director. |
| • | Regular Executive Sessions of Independent Directors.Our independent directors meet privately on a regular basis. Our lead independent director presides at such meetings. |
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| • | Board Access to Management. We afford our directors ready access to our management. Key members of management attend Board and committee meetings to present information concerning various aspects of the Company, its operations, and results. The Corporate Responsibility and Compliance Committee, or Compliance Committee, members also have regular meetings in executive session with our Chief Compliance Officer, and the Audit Committee members have regular meetings in executive session with our internal and external auditors and separate meetings in executive session with our head of Corporate Audit. |
| • | Board Authority to Retain Outside Advisors. Our Board committees have the authority to retain outside advisors. The Audit Committee has the sole authority to appoint, compensate, retain, and oversee the independent registered public accountants. The Compensation and Management Development Committee, or Compensation Committee, has the sole authority to appoint, compensate, retain, and oversee compensation advisors for senior management compensation review. The Governance and Nominating Committee, or Governance Committee, has the sole authority to appoint, retain, and replace search firms to identify director candidates and compensation advisors for our directors’ compensation review. |
| • | Regular Board and Committee Evaluations. The Board and the Audit, Compensation, Compliance, and Governance Committees each have an annual evaluation process. We provide more information regarding the Board and committee evaluations on page 24. |
| • | Management Succession Oversight. Our Board oversees Chief Executive Officer, or CEO, and senior management succession planning. Directors engage with potential CEO, executive, and senior management successors at Board and committee meetings. Our Board also establishes steps to address succession to respond to unexpected vacancies in the event of an emergency. |
| • | Solicitation of Stockholder Perspectives. The Board believes that engagement with stockholders is a source of valuable information and perspectives on the Company. The Board has requested that management solicit input from investors on behalf of the Board and the lead independent director has also met directly with stockholders when appropriate. We provide more information regarding the stockholder engagement program on page 46. |
| • | Majority Approval Required for Director Elections. If an incumbent director up forre-election at a meeting of stockholders fails to receive a majority of the votes cast in favor for his or her election in an uncontested election, the Board will adhere to the director resignation policy as provided in our Amended and Restated Bylaws of Amgen Inc., or Bylaws. |
| • | Director Limitation on Number of Boards. A director who is currently serving as our |
| • | Board Refreshment and Tenure. Our average Board tenure is approximately |
| • | Director Retirement Age. |
| • | Director Changes in Circumstances Evaluated. If a director has a substantial change in principal business or professional affiliation or responsibility, including a change in principal occupation, he or she shall offer his or her resignation to the chairman of the Governance Committee. The Governance Committee determines whether to accept the resignation based on what it believes to be in the best interests of the Company and our stockholders. |
| • | Director Outside Relationships RequirePre-Approval. Without the prior approval of disinterested members of the Board, directors should not enter into any transaction or relationship with the Company in which they will have a financial or a personal interest or any transaction that otherwise involves a conflict of interest. |
| • | Director Conflicts of Interest. If an actual or potential conflict of interest arises for a director or a situation arises giving the appearance of an actual or potential conflict, the director must promptly inform the Chairman of the Board or the chairman of the Governance Committee. All directors are expected to recuse |
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Corporate Governance
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Stockholder Rights
| • | Proxy Access. Our Bylaws permit proxy access for director nominations. Eligible stockholders with an ownership threshold of 3% who have held their shares for at least 3 years and who otherwise meet the requirements set forth in our Bylaws may have their nominees up to the number of directors constituting the greater of 20% of the total number of directors or two nominees of our Board included in our proxy materials. Up to 20 eligible stockholders may group together to reach the 3% ownership threshold. In the course of designing our proxy access provisions, we carefully considered each element in the interest of our stockholders as a whole, including that the number of stockholders who may group together (20) would afford those stockholders likely to utilize proxy access with the opportunity to do so. |
| • | Written Consent. Our Amgen Inc. Restated Certificate of Incorporation permits stockholders to act by written consent in lieu of a meeting upon the request of the holders of at least 15% of our outstanding common shares who otherwise meet the requirements of our Certificate of Incorporation. |
| • | Special Meetings. Our Bylaws permit stockholders to request that the Company call a special meeting upon the written request of the holders of at least 15% of our outstanding common shares who otherwise meet the requirements set forth in our Bylaws. |
| • | NoSupermajorityVoteProvisionsinCertificateofIncorporationor Bylaws. We have a simple majority voting standard to amend our Certificate of Incorporation and Bylaws. |
| • | No Poison Pill. We do not have a shareholder rights plan, or poison pill. |
Our current leadership structure and governing documents permit the roles of Chairman and CEO to be filled by the same or different individuals. The Board has currently determined that it is in the best interests of the Company and our stockholders to have Robert A. Bradway, our CEO and President, serve as Chairman, coupled with an active lead independent director. As such, Mr. Bradway holds the position of Chairman, CEO, and President, and Mr. Eckert has servedserves as the lead independent director since the May 2016 annual meeting of stockholders, or 2016 Annual Meeting.director.
Corporate Governance Structure. The Board believes our corporate governance structure, with its strong emphasis on Board independence, an active lead independent director, and strong Board and committee involvement, provides sound and robust oversight of management.
Annual Evaluation of Leadership Structure and Annual Election of Lead Independent Director. The Board considers and discusses the leadership structure every year. As part of this annual evaluation process, the Board reviews its leadership structure and whether combining or separating the roles of Chairman and CEO is in the best interests of the Company and our stockholders. The Board also considers:
The effectiveness of the policies, practices, and people in place at the Company to help ensure strong, independent Board oversight;
The Company’s performance and the effect the leadership structure could have on its performance;
The Board’s performance and the effect the leadership structure could have on the Board’s performance;
The Chairman’s performance in the role;
The views of the Company’s stockholders; and
The practices at other companies and trends in governance.
If the Board determines that it remains in the best interests of the Company and its stockholders that the CEO serve as chairman, the lead independent director is considered and elected by the independent members of the Board on an annual basis. Mr. Eckert has been elected annually as the lead independent director since the 2016 Annual Meeting and wasre-elected by our Board on March 7, 2019 to continue to serve as lead independent director subject to hisre-election to the Board by our stockholders at the 2019 Annual Meeting.Board.
Overview of Lead Independent Director Responsibilities.The lead independent director is an additional conduit forengages in regular communication between the independent directors and Mr. Bradway, keeping Mr. Bradway apprised of any concerns, issues, or determinations made during the independent sessions, and consults with Mr. Bradway on other matters pertinent to the Company and the Board. The lead independent director’s additional responsibilities outlined in our Corporate Governance Principles include:
Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;
Serving as a liaison between the Chairman and the independent directors;
Previewing the information to be provided to the Board;
Approving meeting agendas for the Board;
Assuring that there is sufficient time for discussion of all meeting agenda items;
Organizing and leadingPreviewing the Board’s evaluation ofinformation to be provided to the CEO;
Being responsible for leading the Board’s annual self-assessment;Board;
Having the authority to call meetings of the independent directors; and
If requested by major stockholders, ensuringOrganizing and leading the Board’s evaluation of the CEO;
Serving as a liaison between the Chairman and the independent directors;
Leading the Board’s annual self-assessment;
Ensuring that he/she is available for consultation and direct communication.
Key Committees Composed of Independent Directors. The Audit, Compensation, Compliance, and Governance Committees are each composed solely of independent directors and provide independent oversight of management. In addition, the Audit, Compensation, and Compliance Committees meet in executive session on a regular basis with no members of management present (unless otherwisecommunication, if requested by major stockholders; and
Presiding at meetings of the committee). Each of our committees effectively manages its Board-delegated duties and communicates regularly withBoard at which the Chairman and members of management. In addition, the Compensation Committee has an effective process for monitoring and evaluating Mr. Bradway’s compensation and performance. Each committee chair provides a report on committee meetings held to the full Board at each regular meetingis not present, including executive sessions of the Board.
Independent Directors Sessions. On a regular basis, the independent directors meet in an executive session without Mr. Bradway to review Company performance, management effectiveness, proposed programsdirectors.
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In addition to the responsibilities outlined above, the lead independent director:
Meets with the Chairman prior to each regular meeting of the Board and its committees to discuss, provide input on, and approve the agendas;
With the Chairman, determines presenters for attendance at Board meetings;
Hasone-on-one discussions with each independent director, including as part of the Board’s annual evaluation process;
Attends all committee meetings, including those committees for which he is not a member (at his discretion) and is provided with access to all committee materials;
Has the authority to engage independent consultants;
Is regularly apprised of inquiries from stockholders;
Interviews Board candidates; and
Has an increased role in crisis management, as appropriate.
Independent Directors Sessions. A meeting of the independent directors is scheduled at every regular Board meeting and the independent directors meet in an executive session without Mr. Bradway to review Company performance, management effectiveness, proposed programs and transactions, and the Board meeting agenda items. These independent sessions are organized and chaired by our lead independent director.director and our lead independent director provides direct feedback to Mr. Bradway after these executive sessions.
Annual Assessment.Independent Committee Leadership. As partThe Audit, Compensation, Compliance, and Governance Committees are each led by independent directors and provide independent oversight of management. In addition:
Each committee chair meets with management in advance of meetings to review and refine agendas, add topics of interest, and review and comment on materials to be delivered to the committee;
Every independent director has access to all committee materials;
Each committee chair provides a report summarizing committee meetings to the full Board at each regular meeting of the Board’sBoard;
Each committee meeting includes adequate time for executive session and the committees meet in executive session on a regular basis with no members of management present (unless otherwise requested by the committee); and
Each committee effectively manages its Board-delegated duties and communicates regularly with the Chairman and members of management.
Furthermore, the Compensation Committee has an effective process for monitoring and evaluating Mr. Bradway’s compensation and performance.
Lead Independent Director. Mr. Eckert has been elected annually as the lead independent director since the May 2016 annual evaluation process,meeting of stockholders and wasre-elected by our Board on March 4, 2020 to continue to serve as lead independent director subject to hisre-election to the Board reviews its leadership structure and whether combining or separatingby our stockholders at the roles of Chairman and CEO is in the best interests of the Company and our stockholders.2020 Annual Meeting.
Benefits of Combined Leadership Structure. The Board believes that the Company and our stockholders have been best served by having Mr. Bradway in the role of Chairman and CEO for the following reasons:
Mr. Bradway is most familiar with our business and the unique challenges we face. Mr. Bradway’sday-to-day insight into our challenges facilitates a timely deliberation by the Board of important matters.
Mr. Bradway has and will continue to identify agenda items and lead effective discussions on the important matters affecting us. Mr. Bradway’s knowledge and extensive experience regarding our operations and the highly-regulated industries and markets in which we compete position him to identify and prioritize matters for Board review and deliberation.
As Chairman and CEO, Mr. Bradway serves as an important bridge between the Board and management and provides critical leadership for carrying out our strategic initiatives and confronting our challenges. The Board believes that Mr. Bradway brings a unique, stockholder-focused insight to assist the Company to most effectively execute its strategy and business plans to maximize stockholder value.
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The strength and effectiveness of the communications between Mr. Bradway as our Chairman and Mr. Eckert as our lead independent director result in effectivecomprehensive Board oversight of the issues, plans, and prospects of our Company.
This leadership structure provides the Board with more complete and timely information about the Company, a unified structure and consistent leadership direction internally and externally and provides a collaborative and collegial environment for Board decision making.
Flexibility of the Leadership Structure. The Board is committed to high standards of corporate governance. The Board values its flexibility to select, from time to time, a leadership structure that is most able to serve the Company’s and stockholders’ best interests based on the qualifications of individuals available and circumstances existing at the time. As such, the Board regularlyannually evaluates whether combining or separating the roles of Chairman and CEO is in the best interests of the Company and our stockholders. The Board believes that a policy limiting its flexibility to choose a leadership structure that will enable the Company to most effectively execute its strategy and business plans to maximize stockholder value would be detrimental to the Company and our stockholders.
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The Board’s Role in Risk Oversight
Our Board oversees an enterprise-wide approach to risk management, which is designed to support the achievement of the Company’s objectives, including its strategic priorities to improve long-term financialoperational and operationalfinancial performance and enhance stockholder value. Our Board believes that a fundamental part of risk management is understanding the risks that we face, monitoring these risks, and adopting appropriate controlcontrols and mitigation of theseactivities for such risks. We believe that the risk management areas that are fundamental to the success of our annual and strategic plansenterprise include the areas of product development, safety and safety,surveillance, supply and quality, value and access, sales and promotion, business development, as well as protecting our assets (financial, intellectual
property, and information (including cybersecurity)), all of which are managed by senior executive management reporting directly to our CEO.
We have implemented an Enterprise Risk Management, or ERM, program, which is a Company-wide effort to identify, assess, manage, report, and monitor enterprise risks that may affect our ability to
achieve the Company’s objectives. The ERM program involves our Board and management and is overseen by one of our senior executive officers. Enterprise risks are identified and managed by management and the business functions and, as discussed below, are overseen by the Board or the appropriate Board committee.
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The Our Board has the ultimate oversight responsibility for the risk management process. The Board discusses enterprise risks with our senior management on a regular basis, including as a part of its annual strategic planning process, annual budget review and approval, capital plan review and approval, and through reviews of compliance issues in the applicable committees of our Board, as appropriate. For example, the potential risk associated with our pricing and access strategy and approach is an area of enterprise risk with respect to which our Board and Compliance Committee receive regular updates. All risk areas are appropriately monitored by management and all risk areas that could lead to business disruption, including the potential to cause severe financial or reputational harm, report to the Board regularly oras-needed, and are subject to appropriate Board oversight.
Each Board Committee has primary risk oversight responsibility that is aligned with its areas of focus. At each regular meeting, or more frequently as needed, the Board receives and considers committee reports, from each of the committees set forth below, which reports may provide additional detail on risk management issues and management’s response. Important categories of risk are assigned to appropriate Board committees that report back to the full Board:
| Committee | Primary Risk Oversight Responsibility | |||
Governance and Nominating | •
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Audit | • Oversees
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Compensation and Management Development | •
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Corporate Responsibility and Compliance | • Overseesnon-financial compliance risk, such as regulatory risks associated with the requirements of the Federal health care program, Food and Drug Administration, and risks associated with privacy, antitrust and competition, anti-corruption, information systems and security (including cybersecurity), pricing and access,
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Oversight of Cybersecurity—Key Priority.The Compliance Committee receives regular updates on projects to strengthen our cybersecurity, major risk areas, and the Company’s approach to address such risks, and the emerging threat landscape. We have safeguards in place to help protect against unauthorized access to, use or disclosure of our information and data, and dedicated executives whose teams advise on risks and assess the effectiveness of our controls.
Oversight of Pricing—Key Priority. The Compliance Committee receives regular updates on pricing and access. We are committed to producing safe and effective therapies that can be appropriately accessed by the patients who need them most, including by:
investing billions of dollars annually in research and development;
developing more affordable therapeutic choices in the form of high-quality and reliably-supplied biosimilars;
partnering with payers to share risk and accountability for health outcomes;
providing patient support and education programs and helping patients in financial need access our medicines; and
working with policy makers, patients, and other stakeholders to establish a sustainable healthcare system with access to affordable care and where patients and their healthcare professionals are the primary decision makers.
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Corporate Governance
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Codes of Ethics and Business Conduct
Our Board has adopted two codes of business conduct and ethics, one that applies to our Board and a second that applies to our Board, all our staff, and others conducting business on our behalf, including our executive officers and Board.behalf. Annual training on the global code of conduct is required and our Board participates in such training. We also have a code of ethics for senior financial officers. To view our codes of
business conduct and ethics, please visit
our website atwww.amgen.com. We intend to disclose any future amendments to certain provisions of our codes of business conduct and ethics, or waivers of such provisions, applicable to our directors and executive officers on our website. There were no waivers of any of our codes of business conduct or code of ethics in 2018.2019.
The Board held 116 meetings in 20182019 and all of the directors attended at least 75% of the total number of meetings of the Board and committees on which they served. Brian J. Druker was appointed to the Board effective at our 2018 annual meeting of stockholders, or 2018 Annual Meeting, and attended all meetings of the Board and committees on
which he served after the date of his appointment. It is the Company’s policy that all current
directors attend our annual meetings of stockholders barring unforeseen circumstances or irresolvable conflicts. Each of our directors were present at our 20182019 Annual Meeting.
Our annual meeting of stockholders provides an opportunity each year for stockholders to ask questions of or otherwise communicate directly with,our lead independent director and other members of the Board on appropriate matters. In addition, stockholders may communicate in writing with any particular director, any committee of the Board, or the directors as a group, by sending such written communication to our Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799. Copies of written communications received at such address will be provided to the Board or the relevant director unless such communications are considered, in the reasonable judgment of our Secretary, to be inappropriate for submission to the intended recipient(s). Examples of stockholder communications that would be considered inappropriate for submission to the Board include, without
without limitation, customer complaints, solicitations, communications that do not relate directly or indirectly to our business, or communications that relate to improper or irrelevant topics. The Secretary or his designee may analyze and prepare a response to the information contained in communications received and may deliver a copy of the communication to other Company staff members or agents who are responsible for analyzing or responding to complaints or requests. Communications concerning potential director nominees submitted by any of our stockholders will be forwarded to the chairman of the Governance Committee. For information on our engagement with our stockholders since the 20182019 Annual Meeting, please see page 4146 of our Compensation Discussion and Analysis.
The Board has four key standing committees: Governance Committee; Audit Committee; Compliance Committee; and Compensation Committee. The Compensation Committee has delegated certain responsibilities to an Equity Award Committee. In addition, an Executive Committee of the Board has all of the powers and authority of the Board in the management of our business and affairs, except with respect to certain enumerated matters, including Board composition and compensation, changes to our Certificate of Incorporation, or any other matter expressly prohibited by law or our Certificate of
Incorporation. The Executive Committee did not meet in 2018.2019. The Board maintains charters for each of these standing committees.committees and these charters are evaluated annually. In addition, the Board has adopted a written set of Corporate Governance Principles and a Board of Directors’ Code of Conduct that generally formalize practices we have in place. To view the charters of our standing Board committees, our Corporate Governance Principles, and the Board of Directors’ code of conduct, please visit our website atwww.amgen.comwww.amgen.com.
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Process for Selecting Directors, Director Qualifications, and Board Diversity
Board Composition. Board composition is one of the most critical areas of focus for the Board. Reflecting our Board’s commitment to refreshment, the Board has appointed five new directors since 2015, including two additional women, adding critical skills and experience to our Board in furtherance of our strategic priorities.
Our Governance Committee regularly screens and recommends candidates for nomination by the full Board and, among other things, considers feedback received during the annual Board and Committee evaluation process, investor feedback, our qualification guidelines and skills matrix, and diversity. The Governance Committee will consider recommendations for director candidates made by stockholders and evaluate them using the same criteria as for other candidates.
Director Qualifications and Board Diversity.Our Governance Committee is responsible for determining Board membership qualifications and for selecting, evaluating, and recommending to the Board nominees for annual election to the Board and to fill vacancies as they arise. The Governance Committee reviews regularly and reports to the Board on the composition and size of the Board, and makes recommendations, as necessary, so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise, and diversity advisable for the Board as a whole and containsmaintains at least the minimum number of independent directors required by applicable laws and regulations.
The Governance Committee maintainsdetermines and oversees guidelines for selecting nominees to serve on the Board and for considering
stockholder recommendations for nominees. The Amgen Inc. Board of Directors Guidelines for Director Qualifications and Evaluations are included in
this proxy statement asAppendix A. Among other things, Board members should possesspossess:
a demonstrated breadth and depth of management and leadership experience, experience;
financial and/or business acumen or relevant industry or scientific experience, experience;
integrity and high ethical standards, standards;
sufficient time to devote to the Company’s business, business;
the ability to oversee, as a director, the Company’s business and affairs for the benefit of our stockholders, stockholders;
the ability to comply with the Amgen Board of Directors Code of Conduct,Conduct; and
a demonstrated ability to think independently and work collaboratively.
In addition, although the Governance Committee does not maintain a diversity policy, the Governance Committee considers diversity in its determinations. Diversity includes race, ethnicity, age, and gender and is also broadly construed to take into consideration many other factors, including industry knowledge, operational experience, and scientific and academic expertise, geography, and personal backgrounds.
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Continuous Board Refreshment
Our Board is committed to strong refreshment practices to continuously align the composition of the Board and its leadership structure with our long-term strategic needs. The Board, led by the Governance Committee, has an ongoing process for identifying, evaluating, and selecting directors.directors, and these decisions are also informed by the annual Board and committee evaluation process described below. Our Governance Committee uses a variety of methods to help identify potential Board candidates and considers an assessment of current Board skills, background, diversity, independence, experience, tenure, and anticipated retirements to identify gaps that may need to be filled through the Board refreshment process.
Independent Search Firms Stockholders Independent Directors Candidate Pool Sourced, Maintained, and Updated Consider Guidelines for Director Qualifications and Evaluations (Appendix A) Consider skills matrix Consider diversity Review independence and potential conflicts Meet candidates Select Directors 5 new directors since 2015 Recommend Candidates to the Board Review by full Boardï 2020 Proxy Statement 23
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Regular Board and Committee Evaluations
Board and committee evaluations play a critical role in supporting the effective functioning of our Board. Through evaluations, our directors review where they believe our Board functions effectively and, importantly, areas where our Board thinks there may be opportunities for improvement, including through Board refreshment.
Annual Governance Review.Our Governance Committee leads an annual evaluation process of the Board and its committees. TheDirectors provide feedback regarding Board and thecommittee composition and structure, role and effectiveness, fulfillment of fiduciary duties, meetings and materials, and interaction with management.
Evaluation Results. The Audit, Compensation, Compliance, and Governance Committees each complete an annual assessment focusing oncompleted their roles, effectiveness, and fulfillment of fiduciary duties.
1. Commence Annual Anonymous Evaluations Formal annual anonymous evaluations of the full Board as well as the Audit, Compensation, and Governance Committees are compiled and distributed Overseenassessments in October 2019 for further evaluation by the Governance Committee 2. Evaluation and Assessment Directors provide feedback regardingin December 2019. The Board and applicable committee: Composition and structure Role and effectiveness Fulfillment of fiduciary duties Meetings and materials Interaction with management 3. Review The lead independent director speaks with each member of the Board for one-on-one discussionscompleted its evaluation in December 2019. Each committee and the full Board conduct separate discussions in was satisfied with its performance and each was considered to be operating effectively, with appropriate balance among governance, oversight, strategic, and operational matters.
Ongoing Feedback. Our directors provide real-time feedback throughout the year outside of the formal evaluation process and have open access to management and third-party advisors. Additionally,
executive session 4. Incorporationsessions of Feedback Follow-up itemsdirectors (without management) are addressed at subsequentscheduled for every regular Board and committee meetingsmeeting to identify any issues and assess whether meeting objectives were satisfied.
Changes Implemented. Based on the annual Board and committee evaluation process, ongoing feedback provided by directors, andone-on-one discussions between our lead independent director and each director, changes to Board practices have included enhancements to our committee structure and composition, additional presentations on various topics, and the addition of new directors.
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The Audit, Compensation, Compliance, and Governance Committees each completed their assessments in October 2018 for further evaluation by the Governance Committee in December 2018. The Board completed its evaluation in December 2018. Each committee and the
Board was satisfied with its performance and each was considered to be operating effectively, with appropriate balance among governance, oversight, strategic, and operational matters.
At least annually, the Governance Committee reviews the independence of eachnon-employee director and makes recommendations to the Board and the Board affirmatively determines whether each director qualifies as independent. Each director must keep the Governance Committee fully and promptly informed as to any development that may affect the director’s independence.
The Board has determined that each of ournon-employee directors is and David Baltimore and François de Carbonnel,Frank C. Herringer, who served as directorsa director during part of 2018, were2019, was independent during 20182019 under The NASDAQ Stock MarketingMarket listing standards and the requirements of the SEC. Mr. Bradway is not independent based on his service as our CEO and President. Mr. Bradway is the only director who also serves us in a management capacity. In making its independence determinations, the Board reviewed direct and indirect transactions and relationships between each director, or any member of his or her immediate family, and us or one of our subsidiaries or affiliates based on information provided by the director, our records, and publicly available information.
All of the reviewed transactions and arrangements were entered into in the ordinary course of business and none of the business transactions, donations, or grants involved an amount that (i) exceeded the greater of 5% of the recipient entity’s revenues or $200,000 with respect to transactions where a director or any member of his or her immediate family or spouse served in any capacity,as an employee, officer, partner, or director, or (ii) exceeded $10,000 with respect to professional or consulting services provided by entities at which directors serve as professors or employees.
The following types and categories of transactions, relationships, and arrangements were considered by our Board in making its independence determinations:
Each of the independent directors (or their immediate family members), except for Fred Hassan, currently serves or has previously served within the last three years as a professor, trustee, director, or member of a board,
director, or member of a board, advisory board, council, or committee for one or more colleges, universities, ornon-profit charitable organizations, including research or scientific institutions, to which The Amgen Foundation, Inc. has made matching donations under our Amgen matching gift program that is available to all of our employees and directors, or has made grants. |
Each of the independent directors (or their immediate family members) currently serves or has previously served within the last three years as a member of the board of directors or the board of trustees or an advisory board for an entity with which Amgen has business transactions or to which Amgen makes donations or grants. The business transactions include, among other things, purchasing supplies, equipment and software licenses, payment of fees or memberships, and expenses relating to repair and maintenance, transportation, utilities, clinical trials, research and development and training, sponsorship of healthcare programs and conferences, financial management, investment advisory and consulting services, and reimbursement of business-related expenses incurred by our staff members (such as for transportation, gas, and food purchases).
Drs.Wanda M. Austin, Baltimore,Brian J. Druker, Rebecca M. Henderson, Tyler Jacks, and R. Sanders Williams currently serve as professors for universities to which Amgen has made payments for certain business transactions such as symposiums, conferences and exhibits, postdoctoral research programs, clinical trials, training and research and development, software licenses and maintenance, as well as for grants.
None of the directors directly or indirectly provides any professional or consulting services to us and none of the directors currently has or has had any direct or indirect material interest in any of the above transactions and arrangements. The Board determined that these transactions and arrangements did not warrant a determination that the director was not independent.
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Governance Committee Processes and Procedures for Considering and Determining Director Compensation
The Governance Committee has the authority to evaluate and make recommendations to our Board regarding director compensation.
The Governance Committee conducts this evaluation periodically by reviewing our director compensation practices against the practices of an appropriate peer group and the Governance Committee may determine to make recommendations to our Board regarding possible changes to director compensation. The Governance Committee conducted such an assessment in 2017 and no changes were made to director compensation.
The Governance Committee has the authority to retain consultants to advise on director compensation matters. During 2017, the
compensation matters. During 2017, the Governance Committee engaged Frederic W. Cook and Co., or FW Cook, to provide advice regarding director compensation. FW Cook reported directly to the Governance Committee and attended the Governance Committee meeting to evaluate director compensation. No executive officer has any role in determining or recommending the form or amount of director compensation. |
The Governance Committee has authority to delegate any of these functions to a subcommittee of its members. No delegation of this authority was made in 2018.
Current Members: Charles M. Holley, Jr.* (Chair) Wanda M. Austin
Fred Hassan*
Ellen J. Kullman*
*Audit Committee financial expert
Others Who Served in
Brian J. Druker Rebecca M. Henderson Tyler Jacks
Number of Meetings Held in
Each member has been determined by the Board to be independent under The NASDAQ Stock Market listing standards and the requirements of the SEC, including the requirements regarding financial literacy and sophistication.
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Description and Key Responsibilities:
• Oversees our accounting and financial reporting process and the audits of the financial statements, as required by NASDAQ.
• Assists the Board in fulfilling its fiduciary responsibilities with respect to the oversight of our financial accounting and reporting, the underlying internal controls and procedures over financial reporting, and the audits of the financial statements.
• Has sole authority for the appointment, compensation,
• Reviews and discusses, prior to filing or issuance, with management and the independent registered public accountants (when appropriate) our audited consolidated financial statements to be included in our Annual Report on Form10-K and earnings press releases.
• Approves all related party transactions, as required by NASDAQ.
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Audit Committee Oversight of the Independent Registered Public Accountants
• Auditor Selection. Evaluates the qualifications and performance of our independent registered public accountants each year and • Audit Partner Selection. • Audit Firm Evaluation. Considers the quality and efficiency of the services provided, the independent registered public accountants’ technical expertise and knowledge of our operations and industry. • Audit Services.Pre-approves services.
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Amgen’s Compliance Program is designed to promote ethical business conduct and ensure compliance with applicable laws and regulations. The key objectives of our compliance program operations include:
developing policies and procedures;
providing ongoing compliance training and education;
auditing and monitoring of compliance risks;
maintaining and promoting avenues for staff to raise concerns, including anonymously through a business conduct hotline;
conducting investigations;
responding appropriately to any compliance violations; and
taking appropriate steps to detect and prevent recurrence.
Our Chief Compliance Officer, who reports to the CEO and the Compliance Committee, oversees the ongoing operations of the compliance program.
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Compensation Committee Processes and Procedures for Considering and Determining Executive Compensation in 2019
Compensation Committee Determination of Compensation.By the first calendar quarter of each year, the Compensation Committee reviews and approves Company performance goals and objectives for the current year and evaluates the CEO’s performance for the previous year in light of the Company performance goals and objectives established for the prior year. The Compensation Committee evaluates the performance of the CEO within the context of the financial and operational performance of the Company, considers competitive market data, and establishes the CEO’s compensation based on this evaluation as well as the compensation for each executive officer.
Values and Components.The values of each component of total compensation (base salary, target annual cash incentive awards, and equity awards) for the current year, as well as total annual compensation for the prior year (including the value of equity holdings, potential change of control payments, and vested benefits under our Retirement and Savings Plan, Supplemental Retirement Plan, and Nonqualified Deferred Compensation Plan as of the end of the last fiscal year) are considered at this time. Final determinations regarding our CEO’s performance and compensation are made during an executive
session of the Compensation Committee and are reported to and reviewed by the Board in an independent directors’ session.
Executive Officers. Our Compensation Committee determines compensation for the executive officers (other than the CEO) based, in part, on the recommendations of our CEO regarding base salary, annual cash incentive awards, and equity awards. In determining compensation recommendations for each NEO, our CEO reviews comparative peer group data, as well as the performance of the executive. The Compensation Committee has typically followed these recommendations.
Executive Sessions.Each Compensation Committee meeting includes adequate time for executive session and the Compensation Committee meets in executive session on a regular basis with no members of management present (unless otherwise requested by the Compensation Committee).
Delegation of Authority. The Compensation Committee has authority to delegate any of its functions to a subcommittee of its members.
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Independent Compensation Consultant. The Compensation Committee continued to engage FW Cook, an independent compensation consultant, to provide advice regarding executive compensation and executive compensation trends and developments, compensation designs, and equity compensation practices, market data as requested, and opinions on the appropriateness and competitiveness of our executive compensation programs relative to market practice. FW Cook reported directly to the Compensation Committee and attended regularly scheduled meetings of the Compensation Committee (including meeting in executive session with the Compensation Committee, as requested). Each year the Compensation Committee reviews the independence of FW Cook and whether any conflicts of interest exist.
After review and consultation with FW Cook, the Compensation Committee has determined that FW Cook is independent and there is no conflict of interest resulting from retaining FW Cook currently or during the year ended December 31, 2019. In performing its analysis, the Compensation Committee considers the factors set forth in the SEC rules and The NASDAQ Stock Market listing standards.
Peer Group Review. In setting executive compensation, the Compensation Committee compares the Company’s pay levels and programs to those of the Company’s competitors for executive talent and uses this comparative data as a guide in its review and determination of compensation. Our Compensation Committee considers and selects an appropriate peer group (consisting of biotechnology and pharmaceutical companies), based, in part, on the recommendations of FW Cook, and, for each Named Executive Officer, or NEO, the Compensation Committee reviews the compensation levels and practices of our peer group, which for our NEOs, other than the CEO, are based on reports prepared by management from information contained in compensation surveys and proxy statements. FW Cook provides the Compensation Committee with market data, an annual report on the compensation levels and practices of our peer group, and recommendations for the CEO position.
Compensation Risk Management.In cooperation with management, FW Cook assesses the potential risks arising from our compensation policies and practices as discussed more fully below.
Annual Risk Management Assessment.On an annual basis, management, working with the Compensation Committee’s independent compensation consultant, conducts an assessment of the Company’s compensation policies and practices for all staff members generally, and for our staff members who participate in our sales incentive compensation program, for material risk to the Company.
Results of Risk Management Assessment.The results of this assessment are reviewed and discussed with the Compensation Committee. Based on this assessment, review and discussion, we believe that, through a combination of risk-mitigating features and incentives guided by relevant market practices and our Company performance goals, our compensation policies and practices do not present risks that are reasonably likely to have a material adverse effect on us.
Factors That Discourage Excessive Risk-Taking.In evaluating our compensation policies and practices, a number of factors were identified which the Company, the Compensation Committee, and its independent consultant believe discourage excessive risk-taking, including:
| • | Mix of Incentives.Our compensation programs consist of a mix of incentives that are tied to varying performance periods and are designed to balance our need to drive our current performance with the need to position the Company for long-term success. |
| • | Company-wide Results.Company-wide results are the most important factor in determining the amount of an annual cash incentive award, one of our mix of incentives, for each of our staff members. |
| • | Emphasis on Long-Term Performance. We cap short-term incentives and make long-term incentive, or LTI, equity awards a component of compensation for nearly all of our full-time staff members. In particular, the CEO and the other executive officers |
participate in compensation plans that are designed so that the largest component of their compensation is in the form of LTI equity awards to ensure that a significant portion of their compensation is associated with long-term, rather than short-term, outcomes, which aligns these individuals’ interests with those of our stockholders. |
| • | Equity Award Grant Practices.We employ appropriate practices with respect to equity awards: we do not award mega-grants, discounted stock options, or immediately vested equity to staff members; and we have grant guidelines that generally limit the grant date for our equity grants to the third business day after our announcement of quarterly earnings. |
| • | Robust Stock Ownership and Retention Guidelines.We have robust stock ownership guidelines for vice presidents and above that require significant investment by these individuals in our Common Stock. We require that each officer who has not met his or her required ownership guidelines hold shares of our Common Stock acquired through the vesting of restricted stock units, the payout of performance units, and the exercise of stock options (net of shares retained by us to satisfy associated tax withholding requirements and exercise price amounts) until such officer has reached his or her required stock ownership level. |
| • | Comprehensive Performance Evaluations. Our Company values and leadership behaviors are an integral part of the performance assessments of our staff members and are particularly emphasized in our assessment tools at higher positions. These evaluations serve as an important information tool and basis for compensation decisions. |
| • | Discretion to Reduce Awards.The Compensation Committee retains full discretion to reduce or eliminate annual cash incentive awards to our executive officers and can and has modified awards downwards. |
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| • | Recoupment Provisions.We have recoupment provisions that expressly allow the Compensation Committee or management, as appropriate, to consider employee misconduct that caused serious financial or reputational damage to the Company when determining whether an employee has earned an annual cash incentive award or the amount of any such award. |
| • | Clawback Policy. We have a clawback policy that requires our Board to consider recapturing past cash or equity compensation payouts awarded to our executive officers if it is subsequently determined that the amounts of such compensation were determined based on financial results that are later restated and |
the executive officer’s misconduct caused or partially caused such restatement. |
| • | Disclosure. Subject to our recoupment and clawback policy statement, we intend to disclose the general circumstances of any application of our recoupment provisions or clawback policy against any executive officer (current or former) and the aggregate amount of compensation recovered. Our policy statement is available on our website atwww.amgen.com. |
| • | No Hedging or Pledging. Our Insider Trading Policy prohibits pledging or purchasing of our Common Stock on margin and hedging the economic risk of our Common Stock (as discussed more fully below). |
Under our global Insider Trading Policy, all of our Board members and staff members, including our NEOs, consultants, contract workers, secondees, and temporary staff worldwide are considered “Covered Persons.” It is against the Insider Trading Policy for Covered Persons to directly or indirectly participate in transactions involving trading activities that by their nature are aggressive or speculative, or may give rise to an appearance of impropriety. Covered Persons may not:
Engage in short sales (sales of stock that the seller does not own or a sale that is completed by delivery of borrowed stock) with respect to our securities;
Engage in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of Amgen stock;
| • | Purchase or pledge Amgen stock on margin or as collateral to secure a loan or other obligation(1); or |
Enter into any derivative or similar transactions with respect to our securities.
Examples of prohibited derivative transactions include, but are not limited to, purchases or sales of puts and calls (whether written or purchased or sold), options (whether “covered” or not), forward contracts, including but not limited to prepaid variable forward contracts; put and call “collars” (“European” or “American”), “equity” or “performance” swap or exchange agreements, or any similar agreements or arrangements however denominated, in our securities.
Following is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our other staff members, calculated in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K. The Company determined our median employee based on total direct compensation paid to all of our staff members worldwide recorded in our global human resources systems as of December 31, 2019. Total direct compensation included base salary (wages recorded in our payroll records as of December 31, 2019), annual cash incentive awards earned for the period (and target sales incentive awards for our sales force), and the annual grant value of LTI equity awards during 2019. Earnings of our staff members outside of the U.S. were
converted to U.S. dollars using the currency exchange rate as of December 31, 2019. Nocost-of-living adjustments were made. We then determined the annual total compensation of our median employee for 2019 which was $130,904. As disclosed in the “Summary Compensation Table” appearing on page 66, our CEO’s annual total compensation for 2019 was $19,612,793. Based on the foregoing, the ratio of the annual total compensation of our CEO to that of the median staff member was 150 to 1. For information on the determination of executive compensation, please see “Compensation Committee Processes and Procedures for Considering and Determining Executive Compensation in 2019” above and our Compensation Discussion and Analysis beginning on page 38.
| (1) | With the exception of the use of a margin account to purchase our common stock in connection with the exercise of Amgen-granted stock options (i.e., “cashless exercises”). |
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Corporate Governance
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Our Environmental Sustainability and Social Responsibility EffortsCompensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review and discussions, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the
Company’s 2020 Annual Meeting proxy statement and incorporated by reference into the Company’s Annual Report on Form10-K for the year ended December 31, 2019.
Compensation Committee of the Board of Directors
Robert A. Eckert, Chairman
Wanda M. Austin
Brian J. Druker
Greg C. Garland
Fred Hassan
Tyler Jacks
Our Commitment to Environmental Sustainability, Social Responsibility, and Human Capital Management
Corporate responsibility is important to Amgen since making a positive difference in the world is at the heart of what we do. As part of our mission to serve patients, we take our responsibilities seriously with respect to the areas of environmental sustainability, social responsibility and corporate governance (ESG).
ESG matters at Amgen are governed at the highest levels. Our executive leadership reports our progress to the Compliance Committee of the Board. An executive-level governance council, chaired by the Senior Vice President of Corporate Affairs, oversees the continuing evolution and enhancement of our approach to corporate responsibility and ESG. With the oversight of executive leadership, individual programmatic elements are managed at a functional level.
In addition to a commitment to ethical business practices, our ESG efforts include integrating environmentally sustainable practices throughout our business, improving patient access to medicines, promoting supplier sustainability and diversity, supporting science education for the next generation of innovators, and enhancing the diversity and inclusiveness of our workplace.
Environmental Sustainability
We have demonstrated oura long-standing commitment to environmentally responsible operations by reducing our impact on the environment in multiple areas of our global business.and regularly set targets to challenge ourselves to deliver further improvements.
Progress Toward Targets. Our 2020 sustainabilityWe are in the last year of our 2012-2020 conservation targets, which are set in areas where we can make the most progress in reducing our environmental impact and business costs,deliver value, including targets for reductions in fleet and facilities carbon, waste, and water use. In addition to beingon-track to deliver on all of our targets, we are well-head of our targets to reduce our carbon and water consumption.
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Reducing Carbon Emissions Through Energy Conservation. Our carbon reduction strategy focuses on eliminating energy use, increasing energy efficiency, and increasing the proportion of energy used from renewable and alternative sources. We have exceeded our 2020 carbon targets and are continuing to work through our portfolio of identified carbon reduction opportunities as we finalize our next generation of environmental targets. Amgen also participates in the CDP (formerly Carbon Disclosure Project).
Innovation in Operations.Sustainable by Design. Amgen helped invent the processes and tools that created the global biotech industry. As we continue to grow and innovate, we are pioneering advanced technologies for research and development and manufacturing to increase operational efficiency, improve access to our medicines, and reduce our environmental footprint.
Our next-generation biomanufacturing facility in Singapore is an example of our innovative capability at work. This redesign of our approach to biomanufacturing dramatically reduces the scale and costs of making biologics, vastly reduces water and energy use, while maintaining a reliable, high-quality, compliant supply of medicines. We broke groundIn 2019, we continued to work on athe construction of our second next-generation biomanufacturing plant in Rhode Island. This new plant is expected to be the first of its kind in the U.S. in 2018.and will use our next-generation biomanufacturing capabilities.
United Nations Global Compact.We are a signatory to the United Nations Global Compact, a voluntary initiative based on commitments to implement universal sustainability principles and take steps to support United Nations goals.
AccoladesClimate-Related Risks and Where to Find Further Information.Opportunities.In 2018, we earned placement onWe have processes to evaluate and quantify risk from climatic events to our operations and take steps to avoid the Dow Jones Sustainability World Index for the fifth yearassociated consequences. Additionally, Amgen has had a carbon and energy reduction strategy since 2008 and, as described above, considerable progress has been made in reducing our carbon footprint as a row and on the North America Index for the sixth year in a row. Our Responsibility Highlights Report is available online atwww.amgen.com/responsibility.result.
Social ResponsibilityCompensation Committee of the Board of Directors
Robert A. Eckert, Chairman
Wanda M. Austin
Brian J. Druker
Greg C. Garland
Fred Hassan
Tyler Jacks
Improving Patient AccessOur Commitment to Medicines.Environmental Sustainability, Social Responsibility, and Human Capital Management
Corporate responsibility is important to Amgen is committed to assisting patients with no or limited drug coverage to access the medicines they need. We provide patient support and education programs and help patients in financial need access our medicines. Amgen Safety Net Foundation supports qualifying patientssince making a positive difference in the U.S. who might go without important medicines because of financial barriers, by providing our medicines at no cost. In 2018, Direct Relief, a leadingnon-governmental organization, distributed Amgen-donated medicines in a number of developing countries for patients in need.
We also partner with payers to share risk and accountability for health outcomes, and help patients access the medicines they need without significant financial burden. We have beenworld is at the forefrontheart of developing innovative contractingwhat we do. As part of our mission to serve patients, we take our responsibilities seriously with respect to the areas of environmental sustainability, social responsibility and partnerships designedcorporate governance (ESG).
ESG matters at Amgen are governed at the highest levels. Our executive leadership reports our progress to improve population healththe Compliance Committee of the Board. An executive-level governance council, chaired by the Senior Vice President of Corporate Affairs, oversees the continuing evolution and enhancement of our approach to corporate responsibility and ESG. With the oversight of executive leadership, individual programmatic elements are managed at a functional level.
In addition to a commitment to ethical business practices, our ESG efforts include integrating environmentally sustainable practices throughout our business, improving patient access as well as outcomes-basedto medicines, promoting supplier sustainability and risk-sharing approaches that directly link the price of our medicines to their effectiveness.
Science Education.Through The Amgen Foundation, Inc., established in 1991, we seek to advance excellence indiversity, supporting science education to inspirefor the next generation of innovators, and invest in strengthening communities whereenhancing the diversity and inclusiveness of our staff members liveworkplace.
Environmental Sustainability
We have a long-standing commitment to reducing our impact on the environment and work. Since inception, the Amgen Foundation has contributed more than $300 millionregularly set targets tonon-profit organizations across the world that reflect our core values and complement Amgen’s dedication challenge ourselves to impacting lives in inspiring and innovative ways. Moreover, through what is now a sixteen-year, $74 million commitment from the Amgen Foundation, the Amgen Scholars Program makes it possible for young scientists across the globe to engage in cutting-edge research experiences and learn more about biotechnology and drug discovery. Additionally, the Amgen Foundation supports the Amgen Biotech Experience, an innovative science education program that empowers high school teachers to bring biotechnology into their classrooms.deliver further improvements.
Our Community.Progress Toward Targets.We have provided support following devastating disasters, including immediate relief for victims of Hurricanes Florence and Michael and devastating wildfires in Southern California, as well as a mass shootingare in the community of Thousand Oaks, California, the locationlast year of our Company headquarters. We also continue2012-2020 conservation targets, which are set in areas where we can make the most progress in reducing our environmental impact and deliver value, including targets for reductions in fleet and facilities carbon, waste, and water use. In addition to provide support for reconstruction efforts in Puerto Rico following Hurricane Maria.beingon-track to deliver on all of our targets, we are well-head of our targets to reduce our carbon and water consumption.
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Compensation Committee Processes and Procedures for Considering and Determining Executive Compensation in 2018
Compensation Committee Determination of Compensation.By the first calendar quarter of each year, the Compensation Committee reviews and approves Company performance goals and objectives for the current year and evaluates the CEO’s performance for the previous year in light of the Company performance goals and objectives established for the prior year. The Compensation Committee evaluates the performance of the CEO within the context of the financial and operational performance of the Company, considers competitive market data, and establishes the CEO’s compensation based on this evaluation.
Values and Components.The values of each component of total compensation (base salary, target annual cash incentive awards, and equity awards) for the current year, as well as total annual compensation for the prior year (including the value of equity holdings, potential change of control payments, and vested benefits under our Retirement and Savings Plan, Supplemental Retirement Plan, and Nonqualified Deferred Compensation Plan as of the end of the last fiscal year) are considered at this time. Final determinations regarding our CEO’s performance and compensation are made during an executive session of the Compensation Committee and are reported to and reviewed by the Board in an independent directors’ session.
Executive Officers. Our Compensation Committee determines compensation for the executive officers (other than the CEO) based, in part, on the recommendations of our CEO regarding base salary, annual cash incentive awards, and equity awards. In determining his compensation recommendations for each NEO, our CEO reviews comparative peer group data. The Compensation Committee has typically followed these recommendations.
Executive Sessions.The Compensation Committee generally holds executive sessions (with no members of management present, unless requested by the Compensation Committee) at its regular meetings.
Delegation of Authority. The Compensation Committee has authority to delegate any of its functions to a subcommittee of its members. No delegation of this authority was made in 2018.
Independent Compensation Consultant. The Compensation Committee continued to engage FW Cook, an independent compensation consultant, to provide advice regarding executive compensation and executive compensation trends and developments, compensation designs, and equity compensation practices, market data as requested, and opinions on the appropriateness and competitiveness
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Reducing Carbon Emissions Through Energy Conservation. Our carbon reduction strategy focuses on eliminating energy use, increasing energy efficiency, and increasing the proportion of energy used from renewable and alternative sources. We have exceeded our executive compensation programs relative2020 carbon targets and are continuing to market practice. FW Cook reported directly to the Compensation Committee and attended regularly scheduled meetingswork through our portfolio of the Compensation Committee (including meeting in executive session with the Compensation Committee,identified carbon reduction opportunities as requested). Each year the Compensation Committee reviews the independencewe finalize our next generation of FW Cook and whether any conflicts of interest exist. After review and consultation with FW Cook, the Compensation Committee has determined that FW Cook is independent and there is no conflict of interest resulting from retaining FW Cook currently or during the year ended December 31, 2018. In performing its analysis, the Compensation Committee considers the factors set forthenvironmental targets. Amgen also participates in the SEC rules and The NASDAQ Stock Market listing standards.
Peer Group Review. In setting executive compensation, the Compensation Committee compares the Company’s pay levels and programs to those of the Company’s competitors for executive talent
and uses this comparative data as a guide in its review and determination of compensation. Our Compensation Committee considers and selects an appropriate peer group (consisting of biotechnology and pharmaceutical companies), based, in part, on the recommendations of FW Cook, and, for each Named Executive Officer, or NEO, the Compensation Committee reviews the compensation levels and practices of our peer group, which for our NEOs, other than the CEO, are based on reports prepared by management from information contained in compensation surveys and proxy statements. FW Cook provides the Compensation Committee with market data, an annual report on the compensation levels and practices of our peer group, and recommendations for the CEO position.
Compensation Risk Management.In cooperation with management, FW Cook assesses the potential risks arising from our compensation policies and practices as discussed more fully below.
Annual Risk Management Assessment.On an annual basis, management, working with the Compensation Committee’s independent compensation consultant, conducts an assessment of the Company’s compensation policies and practices for all staff members generally, and for our staff members who participate in our sales incentive compensation program, for material risk to the Company.CDP (formerly Carbon Disclosure Project).
Results of Risk Management Assessment.Sustainable by Design.The results Amgen helped invent the processes and tools that created the global biotech industry. As we continue to grow and innovate, we are pioneering advanced technologies for research and development and manufacturing to increase operational efficiency, improve access to our medicines, and reduce our environmental footprint.
Our next-generation biomanufacturing facility in Singapore is an example of this assessmentour innovative capability at work. This redesign of our approach to biomanufacturing dramatically reduces the scale and costs of making biologics, vastly reduces water and energy use, while maintaining a reliable, high-quality, compliant supply of medicines. In 2019, we continued to work on the construction of our second next-generation biomanufacturing plant in Rhode Island. This new plant is expected to be the first of its kind in the U.S. and will use our next-generation biomanufacturing capabilities.
United Nations Global Compact.We are revieweda signatory to the United Nations Global Compact, a voluntary initiative based on commitments to implement universal sustainability principles and discussed with the Compensation Committee. Based on this assessment, review and discussion, we believe that, through a combination of risk-mitigating features and incentives guided by relevant market practices and our Company performance goals, our compensation policies and practices do not present risks that are reasonably likelytake steps to have a material adverse effect on us.support United Nations goals.
Factors That Discourage Excessive Risk-Taking.Climate-Related Risks and Opportunities.In evaluatingWe have processes to evaluate and quantify risk from climatic events to our compensation policiesoperations and practices,take steps to avoid the associated consequences. Additionally, Amgen has had a number of factors were identified which the Company, the Compensation Committee,carbon and its independent consultant believe discourage excessive risk-taking, including:energy reduction strategy since 2008 and, as described above, considerable progress has been made in reducing our carbon footprint as a result.
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Following is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our other staff members, calculated in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K. The Company determined our median employee based on total direct compensation paid to all of our staff members worldwide (consisting of approximately 21,516 individuals) recorded in our global systems as of December 31, 2018. Total direct compensation included base salary (wages recorded in our payroll records as of December 31, 2018), annual cash incentive awards earned for the period (and target sales incentive awards for our sales force), and the annual grant value of LTI equity awards during 2018. Earnings of our staff members
outside of the U.S. were converted to U.S. dollars using the currency exchange rate as of December 31, 2018. Nocost-of-living adjustments were made. We then determined the annual total compensation of our median employee for 2018 which was $131,375. As disclosed in the “Summary Compensation Table” appearing on page 67, our CEO’s annual total compensation for 2018 was $18,555,266. Based on the foregoing, the ratio of the annual total compensation of our CEO to that of the median staff member was 141 to 1. For information on the determination of executive compensation, please see “Compensation Committee Processes and Procedures for Considering and Determining Executive Compensation in 2018” above and our Compensation Discussion and Analysis beginning on page 33.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review and discussions, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the
Company’s 2019 Annual Meeting proxy statement and incorporated by reference into the Company’s Annual Report on Form10-K for the year ended December 31, 2018.
Compensation Committee of the Board of Directors
Robert A. Eckert, Chairman
Wanda M. Austin
Brian J. Druker
Greg C. Garland
Fred Hassan
Tyler Jacks
Our Commitment to Environmental Sustainability, Social Responsibility, and Human Capital Management
Corporate responsibility is important to Amgen since making a positive difference in the world is at the heart of what we do. As part of our mission to serve patients, we take our responsibilities seriously with respect to the areas of environmental sustainability, social responsibility and corporate governance (ESG).
ESG matters at Amgen are governed at the highest levels. Our executive leadership reports our progress to the Compliance Committee of the Board. An executive-level governance council, chaired by the Senior Vice President of Corporate Affairs, oversees the continuing evolution and enhancement of our approach to corporate responsibility and ESG. With the oversight of executive leadership, individual programmatic elements are managed at a functional level.
In addition to a commitment to ethical business practices, our ESG efforts include integrating environmentally sustainable practices throughout our business, improving patient access to medicines, promoting supplier sustainability and diversity, supporting science education for the next generation of innovators, and enhancing the diversity and inclusiveness of our workplace.
Environmental Sustainability
We have a long-standing commitment to reducing our impact on the environment and regularly set targets to challenge ourselves to deliver further improvements.
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Reducing Carbon Emissions Through Energy Conservation. Our carbon reduction strategy focuses on eliminating energy use, increasing energy efficiency, and increasing the proportion of energy used from renewable and alternative sources. We have exceeded our 2020 carbon targets and are continuing to work through our portfolio of identified carbon reduction opportunities as we finalize our next generation of environmental targets. Amgen also participates in the CDP (formerly Carbon Disclosure Project).
Sustainable by Design. Amgen helped invent the processes and tools that created the global biotech industry. As we continue to grow and innovate, we are pioneering advanced technologies for research and development and manufacturing to increase operational efficiency, improve access to our medicines, and reduce our environmental footprint.
Our next-generation biomanufacturing facility in Singapore is an example of our innovative capability at work. This redesign of our approach to biomanufacturing dramatically reduces the scale and costs of making biologics, vastly reduces water and energy use, while maintaining a reliable, high-quality, compliant supply of medicines. In 2019, we continued to work on the construction of our second next-generation biomanufacturing plant in Rhode Island. This new plant is expected to be the first of its kind in the U.S. and will use our next-generation biomanufacturing capabilities.
United Nations Global Compact.We are a signatory to the United Nations Global Compact, a voluntary initiative based on commitments to implement universal sustainability principles and take steps to support United Nations goals.
Climate-Related Risks and Opportunities.We have processes to evaluate and quantify risk from climatic events to our operations and take steps to avoid the associated consequences. Additionally, Amgen has had a carbon and energy reduction strategy since 2008 and, as described above, considerable progress has been made in reducing our carbon footprint as a result.
Social Responsibility
Improving Patient Access to Medicines. Amgen is committed to assisting patients with no or limited drug coverage to access the medicines they need. We provide patient support and education programs and help patients in financial need access our medicines. Amgen Safety Net Foundation (ASNF), a separate legal entity entirely funded by Amgen, supports qualifying patients in the U.S. who might go without important medicines because of financial barriers, by providing our medicines at no cost. In 2019, the commercial value of Amgen’s medicines provided at no cost to uninsured or underinsured patients by ASNF was approximately $1.5 billion(1). In 2018, Amgen donated over $93 million worth of Amgen cancer treatment and supportive care medicines(1)for distribution to patients in 18 developing countries through Direct Relief, a leadingnon-governmental organization, and we recently completed a second donation of medicine through Direct Relief in 2019.
We also partner with payers to share risk and accountability for health outcomes, and help patients access the medicines they need without significant financial burden. We continue to spearhead implementation of innovative contracting, including outcomes-based and risk-sharing approaches, to improve patient access to medicines while providing budget predictability to payers, in addition to value based partnerships designed to create mutually beneficial opportunities, improve patient outcomes, experience, and satisfaction in the context of the healthcare system and overall total costs to society.
Supplier Sustainability and Diversity.All staff members are responsible for upholding the Amgen Values and Code of Conduct and, similarly, we require our suppliers to conduct their businesses in alignment with our mission and values. We focus not only on commitment to quality, cost, and reliability but also on a wide range of sustainability and social responsibility considerations, such as business ethics, labor and human rights, and environmental impacts.
We also have a supplier diversity program designed to identify, develop, and utilize small, disadvantaged, veteran, service-disabled veteran, minority, and women-owned business enterprises, as well as companies located in historically underutilized business zones, in our procurement of goods and services.
Science Education.The Amgen Foundation, Inc. (Amgen Foundation),a separate legal entity entirely funded by Amgen, seeks to advance excellence in science education to inspire the next generation of innovators, and invest in strengthening communities where our staff members live and work.
Since its inception almost 30 years ago, the Amgen Foundation has contributed more than $325 million tonon-profit organizations across the world that reflect our core values and complement Amgen’s dedication to impacting lives in inspiring and innovative ways.
Through what is now a sixteen-year commitment from the Amgen Foundation, the Amgen Scholars Program makes it possible for young scientists across the globe to engage in cutting-edge research experiences and learn more about biotechnology and drug discovery.
LabXchange, developed at Harvard University with the financial sponsorship of the Amgen Foundation, is a free online science education platform which launched in January 2020 providing students around the world with access to personalized instruction, next-generation virtual lab experiences, and networking opportunities across the global, scientific community.
The Amgen Foundation is the biology partner of the Khan Academy, a leading online learning educational platform with over 89 million registered users across the globe.
Additionally, the Amgen Foundation supports the Amgen Biotech Experience, an innovative science education program that empowers high school teachers to bring biotechnology education into their classrooms.
| (1) | Valued at wholesale acquisition cost. |
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Our Community.The Amgen Foundation has provided support following devastating disasters, including immediate relief for victims of the wildfires in Australia and Southern California, and continues to provide support for reconstruction efforts in Puerto Rico following Hurricane Maria. Moreover, the Amgen Foundation provides programs and resources to empower individual Amgen staff in their charitable giving, including through a matching gift program and by providing service grants tonon-profit organizations where staff members regularly volunteer.
Amgen’s Response to the COVID-19 Pandemic As a leading global healthcare company and responsible corporate citizen, Amgen is committed to help address theCOVID-19 outbreak. We have prioritized the safety of our employees, supply of our medicines to patients, and health of the communities where we live and work. For information on our response to this unprecedented situation, please visitwww.amgen.com/COVID-19(1). |
Human Capital Management
Our Board has a key role in the oversight of our culture, setting the tone at the top, and holding management accountable for maintaining high ethical standards. The Board believes that human capital management, including diversity and inclusion initiatives, are important to our success. We conduct staff member engagement surveys on a regular basis and the results of these surveys are discussed with the Board.
Amgen places significant value on fostering and enabling growth for staff, both personally and professionally, and we are committed to providing a safe, healthy, innovative, and diverse work environment for our staff.
Our Social Architecture. Since Amgen’s founding in 1980, our staff members have directed their intelligence and enthusiasm toward a simple, yet powerful mission to serve patients. This clearly articulated mission, our aspiration to be the world’s best human therapeutics company, a carefully considered strategy informed by our mission and aspiration, a well-defined set of Amgen Values that define how we behave, and clear leadership attributes that we expect from our staff members, together form the “social architecture” that defines our unique culture. This social architecture is deeply rooted in our culture and has enabled Amgen’s growth over the past forty years from an early pioneer in the biotech industry to a leading innovator and world-class biologics manufacturer.
The Amgen Values were formalized in 1996 and continue to serve as the principles that guide the way we conduct business
Amgen Values
| Be Science-Based | Trust and Respect Each Other | |
| Compete Intensely and Win | Ensure Quality | |
Create Value for Patients, | Work in Teams | |
| Be Ethical | Collaborate, Communicate, and Be Accountable |
Diverse and Inclusive Workforce. We believe that an environment of inclusion and belonging fosters innovation, which drives our ability to serve patients. Our global presence is strengthened by having a workforce that reflects the diversity of the patients we serve. To that end, we established a new executive diversity, inclusion, and belonging council chaired by our CEO. With endorsement from executive management and engagement with senior leaders across the organization, we have implemented a global strategy designed to leverage our diversity and create a more inclusive workspace.
This strategy is designed to help us successfully navigate a global, complex marketplace as we bring more medicines to patients around the world. In addition, we are setting goals to improve our focus around diversity, inclusion, and belonging and Amgen is positioned to amplify our program reach across the globe and measure our progress towards creating a more inclusive workplace. Additionally, we currently have global Employee Resource Groups at our Company, all with executive sponsorship, that are organized around primary diversity attributes, including:
Amgen Asian Association (AAA) | Amgen Black Employee Network (ABEN) | |
Ability Bettered through Leadership and Education (ABLE), a resource group for the physically or cognitively disabled | ||
Amgen Early Career Professionals (AECP) | Amgen Indian Subcontinent Network (AISN) | |
Amgen Latino Employee Network (ALEN) | Amgen LGBTQ and Allies Network (PRIDE) | |
Amgen Veterans Employees Network (AVEN) | Women Empowered to be Exceptional (WE2) | |
Attracting and Developing Talent. Our success depends on our ability to attract and retain talent and skilled staff members. We compensate our staff members based on their roles, experience, and performance, provide wellness resources, as well as support employees in giving back and volunteering in their local communities. Amgen has added transgender benefits and continues to pride itself on industry-leading, family-friendly offerings for families of all compositions.
| (1) | Reference to our website is not intended to function as a hyperlink and the information contained on our website is not intended to be part of this proxy statement. |
ï 2020 Proxy Statement 33
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Item 2 — Advisory Vote to Approve Our Executive Compensation
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Advisory Vote to Approve Our Executive Compensation
This advisory stockholder vote, commonly known as “Say on Pay,” gives you, as a stockholder, the opportunity to endorse or not endorse our executive pay program and policies. Accordingly, you are being asked to cast an advisory vote on the compensation of our Named Executive Officers, or NEOs, as disclosed in the Compensation Discussion and Analysis (pages 3338 through 66)65) and related compensation tables and the narrative in this proxy statement (pages 6766 through 83)82).
Our executive compensation program is designed to achieve the following objectives:
Pay for performance in a manner that strongly aligns with stockholder interests by rewarding both ourshort- and long-term measurable performance.
Drive our business strategy by positioning our staff to execute on our strategic priorities in the near- and longer-term.
Attract, motivate, and retain the highest level of executive talent by providing competitive compensation, consistent with their roles and responsibilities, our success, and their contributions to this success.
Mitigate compensation riskby maintaining pay practices that reward actions and outcomes consistent with the sound operation of our Company and with the creation of long-term stockholder value.
Consider all Amgen staff members in the design of our executive compensation programs, to ensure a consistent approach that encourages and rewards all staff members who contribute to our success.
We Have Implemented Compensation Best Practices
What we do
|
| ✓ | A substantial majority of NEO compensation is |
| ✓ | Recoupment in the case of misconduct causing serious financial or reputational damage |
| ✓ | Clawback policy tied to financial restatement |
| ✓ | Robust stock ownership and retention guidelines |
| ✓ | Minimum vesting periods for equity compensation |
| ✓ |
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Long-term performance-based equity awards (80% of total target equity) |
| ✓ | Independent compensation consultant |
What we don’t do
|
No hedging or pledging |
Nore-pricing or backdating |
No taxgross-ups (except in connection with relocation) |
No single-trigger for stock options and restricted stock units in the event of a change of control |
| ⨯ | No excessive perks |
No employment agreements |
No dividends paid on unvested equity |
No defined benefit pension or supplemental executive retirement plan (SERP) benefits |
28 34 ï 20192020 Proxy Statement
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Item 2 — Advisory Vote to Approve Our Executive Compensation
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20182019 Executive Compensation Was Aligned With Our Strategy and Performance
As discussed more fully in our Compensation Discussion and Analysis starting on page 33,38, a significant majority of each NEO’s compensation isat-risk and dependent on our performance and execution of our strategic priorities.
| LTI Equity Award Allocation | ||
| 
| |
20182019 Performance AgainstPre-Established Goals and Measures
2018 Annual Cash Incentive Program
| 2016-2018 Long-Term Incentive Performance Program
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2019 Annual Cash Incentive Program
| 2019 Annual Cash Incentive Program
| 2017-2019 Long-Term Incentive Performance Award Payout
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Goal
| Weighting
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% of Target Earned
| |
| Weighting
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% of Target Earned
|
| ||||||||
Financial Performance
|
Financial Performance
|
Financial Performance
| ||||||||||||||
Revenues
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| 30%
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| 224.7%
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| 30%
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| 177%
| ||||||||
Non-GAAP Net Income(1)
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| 30%
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| 186.5%
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| 30%
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| 168%
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Progress Innovative Pipeline
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Progress Innovative Pipeline
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Progress Innovative Pipeline
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Advance Early Pipeline
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| 5%
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| 113.9%
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| 10%
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| 100%
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Execute Key Clinical Studies and Regulatory Filings
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| 20%
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| 120.8%
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| 20%
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| 80%
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Deliver Annual Priorities
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Deliver Annual Priorities
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Deliver Annual Priorities
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Execute Critical Launches and Long-Term Commercial Objectives
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| 10%
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| 71.3%
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| 5%
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| 77%
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Achieve Transformation Objectives
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| 5%
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| 124.2%
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Achieve Productivity Objectives
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| 5%
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| 107%
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Final Score
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| Achieved 166.6%
| |
| Achieved 138.9%
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| (1) |
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| (2) | The operating measures of the |
ï 20192020 Proxy Statement 2935
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Item 2 — Advisory Vote to Approve Our Executive Compensation
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20182019 Alignment of Pay with Performance
Our strategy includes a series of integrated activities to strengthen our long-term competitive position in the industry. Key 20182019 activities that align our NEO pay with performance and support the execution of our strategic priorities are summarized below.
We deliveredOur financial performance was strong financial performance.in a year of transition.
Revenues were $23.7 billion in 2018, an increase of 4% from 2017, driven primarily by product sales growth.
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We realized benefits from ongoing transformation initiatives along with increased investment in both research and development and our launch products.
We delivered aone-year total shareholder return, or TSR, of 15% and a five-year return of 93%, outperforming28%. We outperformed our peer group average for theone-, three-, and five-year TSRs and significantly outperformed the Standard & Poor’s 500 Index over both time periods.for the three-year period.
In March 2019, when we established our 2019 performance goals, we expected to drive volume growth in our newer products, but we also anticipated substantial competition against our legacy products due to patent expiries that would more than offset newer product sales growth. Our early 2019 investor guidance also reflected this anticipated competitive intensity.
| • | In 2019, we grew product volumes by 3% globally. And, despite the anticipated competitive headwinds, we outperformed our budgeted financial targets and exceeded our original guidance as we retained more of our legacy product sales than expected, drove our newer product volume growth, and addedOtezla® to our product portfolio. |
Total Shareholder ReturnOur strong cash flows and balance sheet allowed continued investment for long-term growth in 2019 through internal research and development, capital expenditures, and external business development transactions.
Our quarterly 20182019 dividend of $1.32$1.45 per share represented a 15 percent10% increase from the quarterly dividend for 2017.2018.
During 2018,In 2019, we repurchased $17.9returned $11.2 billion to our stockholders in the form of repurchases of our Common Stock ($7.7 billion) and dividends paid dividends totaling $3.5 billion, resulting in our returning a total of $21.4 billion of capital to our stockholders through stock repurchases and dividends.($3.5 billion).
We progressed our pipeline.
We develop innovative and biosimilar medicines that address unmet medical needs to treat serious illnesses. In 2018, we launched two innovative products,
| • | In 2019, we launchedEVENITY®(1), an innovative product for the treatment of osteoporosis in postmenopausal women at high risk of fracture, and two oncology biosimilars,MVASI®(2) (biosimilar bevacizumab (Avastin®)) andKANJINTI®(2) (biosimilar trastuzumab (Herceptin®)) in the U.S. |
We advanced our early pipeline and generated a significant number of innovativeexecuted key clinical studies and regulatory filings.
first-in-class molecules inWe delivered on our portfolio.
We launched four medicines in 2018.annual priorities.
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| • | We executed critical launches and long-term commercial objectives. Our revenues benefited from volume-driven growth from a number of innovative medicines, including |
We achieved our productivity objectives. We realized gross savings of approximately $286 million as a result of our focus on productivity to support continued reinvestment opportunities (such as our early pipeline).
We continued to deliver on our other strategic priorities.
We launched our first product in China and made significant progress in expanding our presence in China and Japan, the second and third largest pharmaceutical markets, respectively.
We successfully operated our next-generation manufacturing facility in Singapore and continued to work on the construction of our U.S facility in Rhode Island.
Positive 2019 Say on Pay Vote Outcome and Engagement With Our Stockholders
In 2019, we received approximately 93% stockholder support on our say on pay advisory vote. In addition to our outreach by our executives and our Investor Relations department to our investors owning approximately 58% of our outstanding shares, since our 2019 annual meeting of stockholders, we have engaged in governance-focused outreach activities and discussions with stockholders comprising approximately 51% of our outstanding shares. The compensation-related feedback is
reviewed by our Compensation and Management Development Committee, or Compensation Committee. In 2019, the predominant feedback from investors with respect to our compensation and governance practices was that they are satisfied with our compensation program and governance practices. For more detail regarding our stockholder engagement, see page 46.
| (1) |
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| (2) | Jointly developed in |
| (3) | Jointly developed in collaboration with Novartis AG. |
30 36 ï 20192020 Proxy Statement
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Item 2 — Advisory Vote to Approve Our Executive Compensation
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We advanced our early pipeline with approximately 20 unique oncology assets in development.
We initiated 10first-in-human studies, including for small-cell lung cancer, obesity, glioblastoma, relapsed/refractory diffuse largeb-cell lymphoma, mantle cell lymphoma and follicular lymphoma, multiple myeloma, acute myeloid leukemia,non-hodgkins lymphoma, and cardiovascular disease.
In the oncology pipeline, we are advancing approximately 20 early-stage product candidates in therapeutic indications ranging from solid tumors (including small-cell lung cancer) and hematological malignancies (including multiple myeloma and acute myeloid leukemia). We have designed these development programs to rapidly establishproof-of-concepts and generate data to support our move into the pivotal phase so that we may get these innovative therapies to patients as quickly as possible.
We executed key clinical studies and regulatory filings.
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We delivered on our annual priorities to execute critical launches and long-term commercial objectives.
Revenue growth (4%) benefited from double-digit, volume-driven sales growth from a number of our innovative medicines that address unmet medical needs to treat serious illnesses, including Repatha in cardiovascular disease, Prolia in osteoporosis, and KYPROLIS in cancer.
We realized our 2014-2018 commitments to investors and our transformation objectives.
2018 was the capstone year for a set of ambitiousnon-GAAP financial commitments we made to our stockholders five years ago, including earnings per share growth, operating margin improvement, and return of capital that we met and exceeded through significant transformation and process improvement efforts. The benefits of our transformation continues in the productivity capabilities we have embedded into our business to reallocate resources to our pipeline and growth opportunities, putting us in a better position to serve patients and deliver long-term growth.
We invested for long-term growth while returning substantial capital to our stockholders.
In 2018, we invested $3.7 billion in research and development and $738 million in capital expenditures.
Between 2011 and 2018, we have increased our global presence to approximately 100 countries from 50.
Next-generation biomanufacturing plants require a smaller manufacturing footprint and offer greater environmental benefits, including reduced consumption of water and energy and lower levels of carbon emissions. In 2018, we successfully operated our next-generation manufacturing facility in Singapore and broke ground on a next-generation biomanufacturing plant in Rhode Island. This new plant will be the first of its kind in the U.S. and will use our proven next-generation biomanufacturing capabilities to manufacture our products while maintaining a reliable, high-quality, compliant supply of medicines to continue our commitment to meet the need of every patient every time.
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ï 2019 Proxy Statement 31
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Positive 2018 Say on Pay Vote Outcome and Engagement With Our Stockholders
In 2018, we received approximately 95% stockholder support on our say on pay advisory vote. Consistent with our broad direct stockholder outreach over the past several years, since our 2018 annual meeting of stockholders, in addition to our outreach by our executives and our Investor Relations department to our investors owning approximately 58% of our outstanding shares, we have engaged in governance-focused outreach activities and discussions with stockholders
comprising approximately 53% of our outstanding shares. The compensation-related feedback is reviewed by our Compensation and Management Development Committee, or Compensation Committee. In 2018, the predominant feedback from investors with respect to our compensation and governance practices was that they are satisfied with our compensation program and governance practices. For more detail regarding our stockholder engagement, see page 41.
Board Recommends a Vote “FOR” Our Executive Compensation
Our Board of Directors, or Board, believes that our current executive compensation program aligns the interests of our executives with those of our stockholders and compensation outcomes are primarily based on the performance of our Company. We intend that our compensation programs reward actions and outcomes that are consistent with the sound operation of our Company, advance our strategy, and are aligned with the creation of long-term stockholder value.
For the reasons discussed above and more fully in the Compensation Discussion and Analysis, the Board recommends that stockholders vote “FOR” the following resolution:
“Resolved, that the stockholders approve, on an advisory basis, the compensation paid to the Company’s Named Executive Officers, as
disclosed pursuant to Securities and Exchange Commission rules in the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative disclosure of this proxy statement.”
Although this vote is advisory and is not binding on the Board, our Compensation Committee values the opinions expressed by our stockholders and will consider the outcome of the vote when making future executive compensation decisions.
We currently conduct annual advisory votes on executive compensation, and we expect to conduct the next advisory vote on executive compensation at our 20202021 annual meeting of stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADVISORY RESOLUTION TO APPROVE THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
32 ï 20192020 Proxy Statement 37
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Compensation Discussion and Analysis
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Compensation Discussion and Analysis
Table of Contents
ï 2019 Proxy Statement 33
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This Compensation Discussion and Analysis describes our compensation strategy, philosophy, policies, programs, and practices or compensation program, for our Named Executive Officers, or NEOs, and the positions they held in 20182019 below.
| Name | Title | |
Robert A. Bradway | Chairman of the Board, Chief Executive Officer and President | |
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| |
Murdo Gordon | Executive Vice President, Global Commercial Operations | |
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| |
David W. Meline | Executive Vice President and Chief Financial Officer(1) | |
David M. Reese | Executive Vice President, Research and Development | |
Jonathan P. Graham |
| |
Planned Succession – Executive Officer Changes in 2018
In 2018, as part of our planned executive succession and to address retirements, we announced transition plans for two Executive Vice Presidents. Sean Harper retired from the role of Executive Vice President, Research and Development on July 26, 2018, after serving in this role since 2012 and for 16 years with Amgen. David Reese, then our Senior Vice President, Translational Sciences and Oncology, was promoted to the role of Executive Vice President, Research and Development, effective July 26, 2018. Dr. Reese joined Amgen in 2005 and has served in a variety of leadership roles since that time. Dr. Harper remained employed with us in anon-executive officer capacity to assist in the transition until January 2019.
Anthony Hooper retired from the role of Executive Vice President, Global Commercial Operations on September 3, 2018, after serving in this role since 2011. Murdo Gordon joined us as our Executive Vice President, Global Commercial Operations, effective September 3, 2018, from Bristol-Myers Squibb Company where he served as Chief Commercial Officer since 2016 and, prior to that, head of worldwide markets. Mr. Hooper continues to be employed in anon-executive officer capacity to assist in the transition, as well as to lead and execute on several corporate strategic objectives.
| (1) | Mr. Meline retired as Chief Financial Officer on December 31, 2019. Peter H. Griffith became Executive Vice President and Chief Financial Officer effective January 1, 2020. As he was not an executive officer in 2019, Mr. Griffith is not considered a Named Executive Officer in this proxy statement. |
34 38 ï 20192020 Proxy Statement
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Compensation Discussion and Analysis
|
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Our strategy includes a series of integrated activities to strengthen our long-term competitive position in the industry. Select 2018 activities2019 activity that supportsupports the execution of our strategic priorities and align our NEO pay withdelivery of performance are summarized below and discussed further in the following pages.
Our Strategic Priorities
Innovative Medicines | Branded Biosimilars | Transforming Amgen for the Future | ||||||
Capital Allocation and Investing for Long-Term Growth | Global Geographic Reach | Next-Generation Biomanufacturing |
Innovative Medicines |
|
| •Launched EVENITY®(1) (osteoporosis) •Acquired Otezla® (apremilast) • Progressed innovative pipeline: –8 product teams formed(2) –7 first-in-human studies initiated –4 programs advanced throughearly-to-late stage portal(3) | |||||||||||
Branded Biosimilars |
| We believe our deep experience in biologics development and | • Launched our first biosimilars in the U.S.: –MVASI®(4)(biosimilar bevacizumab (Avastin®)) –KANJINTI®(4) (biosimilar trastuzumab (Herceptin®)) •AVSOLA™ (biosimilar infliximab (Remicade®))approved in U.S. •ABP 798(4) (biosimilar rituximab (Rituxan®))Biologics License Application submitted to U.S. Food and Drug Administration | |||||||||||
Transforming Amgen for the Future | In 2019, we began realizing the benefit of productivity initiatives embedded in our business. The savings from the productivity initiatives have contributed, and we expect will continue to contribute, to funding strategic growth investments, such as investment in research and development. | • which we |
| |||||||||||
| �� | Capital Allocation and Investing for Long-Term Growth |
| Our strong cash flows and balance sheet also allows us to make substantial investments for long-term growth. We also recognize that stockholders who support investment in developing innovative medicines require an appropriate return on the capital they commit to Amgen. | • Invested $16B for long-term growth: –Acquired Otezla andNuevolution AB –20.5% equity stake in BeiGene Ltd.(5) • Returned capital to stockholders: – $7.7B in stock repurchases – $3.5B of dividends paid ◾$1.45 per share per quarter,a 10% per share dividend increase over 2018 | ||||||||||
Global Geographic Reach |
| We are leveraging our global presence to deliver the potential of our products to patients globally. Amgen medicines are now available to patients in approximately 100 countries worldwide (up from 50 in 2011). | • Launched Repatha® in China • Launched EVENITY in Japan • Expanded oncology presence in China through strategic collaboration with BeiGene Ltd. | |||||||||||
| Next-Generation Biomanufacturing |
| Next-generation biomanufacturing plants | • Singapore next-generation biomanufacturing • Continued work on the construction of our first U.S. next-generation biomanufacturing plant | |||||||||||
| (1) | Jointly developed in collaboration with UCB. Developed in Japan by Amgen Astellas BioPhrama K.K., our joint venture with Astellas Pharma Inc. |
| (2) | Formed when a molecule has been judged to have the potential to be safe and effective in humans. |
| (3) | The period covering Phase 2 through Phase 3. |
| (4) | Jointly developed in collaboration with Allergan plc. |
| (5) | Entered into strategic collaboration with BeiGene Ltd. in October 2019; closed in January 2020. |
ï 2020 Proxy Statement 39
Compensation Discussion and Analysis |
| Our Compensation and Governance Best Practices | ||||||||||||
What we do
| ✓ |
|
|
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| ✓ | Clawback policy: Our Board of Directors, or Board, is required to consider the recapture of past cash or long-term incentive, or LTI, equity award payouts to our NEOs if the amounts were determined based on financial results that are later restated and the NEOs’ misconduct is determined by the Board to have caused the restatement. |
| ✓ | Robust stock ownership and retention guidelines: We have a six times base salary ownership requirement for our Chief Executive Officer, or CEO. Our Executive Vice Presidents and Senior Vice Presidents have three times and two times base salary ownership requirements, respectively. Officers are required to hold shares of our Common Stock acquired through the vesting of restricted stock units, or RSUs, the payout of performance units, or the exercise of stock options until they have reached the required stock ownership level. Compliance with this policy is assessed annually and all executive officers, including our NEOs, who were expected to meet such guidelines by December 31, 2019, were in compliance. |
| ✓ | Minimum vesting periods: Our equity incentive plan provides that our equity awards are subject to a minimum vesting period of no less than one year on 95% of equity awards granted and our grants generally vest over four years, with no vesting in the first year and vesting in three approximately equal annual installments on the second, third, and fourth anniversaries of the grant date. |
| ✓ | Performance-based equity: Our LTI equity award grants are primarily (80%) performance-based, with 50% in the form of three-year performance units. |
| ✓ | Independent compensation consultant: The Compensation Committee retained and sought advice from Frederic W. Cook & Co., or FW Cook, to assist the Compensation Committee in its review and determination of executive compensation. |
| ✓ | Amgen Values:The Amgen Values overlay our Company performance goals and the Compensation Committee assesses each NEO’s annual compensation, including the annual incentive award, based on compliance with these internal standards. |
What we don’t do
⨯ | No hedging or pledging: With respect to our Common Stock, all of our staff members and Board members are prohibited from engaging in short sales, purchasing or pledging our Common Stock on margin, or entering into any hedging, derivative, or similar transactions. | |
⨯ | Nore-pricing or backdating:We have strong LTI equity award plans and policies that prohibitre-pricing or backdating of equity awards. | |
⨯ | No taxgross-ups: We do not provide taxgross-ups, except for business-related payments such as reimbursement of certain relocation expenses on behalf of newly hired and current executives who agree to relocate to work on the Company’s behalf. | |
⨯ | No single-trigger and nogross-ups in the event of a change of control: We do not have “single-trigger” equity vesting acceleration upon a change of control for RSUs and stock options and do not provide taxgross-ups on change of control payments. | |
⨯ | No excessive perks:Our perquisites are limited to those with a clear business-related rationale. | |
⨯ | No employment agreements: We do not have employment contracts or guaranteed bonuses, other than in countries where they are required by law. | |
⨯ | No dividends paid on unvested equity: Dividends equivalents accrue on our performance units and RSUs, but are paid out in shares of our Common Stock only when and to the extent the underlying award is earned and vested. Stock options do not have dividend equivalent rights. | |
⨯ | No defined benefit pension or supplemental executive retirement plan (SERP) benefits or “above market” interest on deferred compensation. |
20192020 Proxy Statement 35
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Compensation Discussion and Analysis
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Aligning Pay With Performance and Execution of Our Strategic Priorities
A significantsubstantial majority of each NEO’s compensation is “at risk” and earned based on our performance and execution of our strategic priorities.strategy and performance. Our annual cash incentive and long-term equity incentive programs together promote focus on bothactivities supporting the execution of our strategic priorities as well as near- and long-term stockholder value creation by providingcreation. This incentive compensation that is earned based on our financial, operating, and stock price performance and is “at risk.” We have been pleased with the 95%+ level of stockholder support we have received on our say on pay advisory vote over time.performance. In 2018,2019, we made significant progress on our 2018 performance goals and advancing our strategic priorities, facilitating execution onof our strategy and mission to serve patients.
Annual Cash Incentive Program Results
Our 2018 annual cash incentive compensation program is tied directly to our performance based onpre-established financial goals of revenues andnon-GAAP net income(1), and operating performance goals of progressing our pipeline and delivering on annual priorities, which were designed to drive execution of strategic priorities. Our 2018 results and the weighting of the goals are as follows:
| ||||||
Goal
| Weighting
|
% of Target
| ||||
Financial Performance
| ||||||
Revenues
|
| 30%
|
| 224.7%
| ||
Non-GAAP Net Income(1)
|
| 30%
|
| 186.5%
| ||
Progress Innovative Pipeline
| ||||||
Advance Early Pipeline
|
| 5%
|
| 113.9%
| ||
Execute Key Clinical Studies and Regulatory Filings
|
| 20%
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| 120.8%
| ||
Deliver Annual Priorities
| ||||||
Execute Critical Launches and Long-Term Commercial Objectives
|
| 10%
|
| 71.3%
| ||
Achieve Transformation Objectives
|
| 5%
|
| 124.2%
| ||
Final Score
|
| Achieved 166.6%
| ||||
The above-target results under our 2018 incentive program reflect our successes against our strategic priorities as outlined below.
1. Our financial performance was strong.
Revenues were $23.7 billion in 2018, an increase of 4% from 2017, primarily driven by product sales growth.
|
We delivered aone-year one year total shareholder return, or TSR, of 15% and a five-year return of 93%, outperforming28%. As depicted below, we outperformed our peer group average TSR for each of theone-, three-, and five-year periods, and strongly outperformed the Standard &and Poor’s 500 Index, or S&P 500, over both time periods.
Total Shareholder Return
2. We progressed our pipeline.
We develop innovative and biosimilar medicines that address unmet medical needs to treat serious illnesses. In 2018, we launched two innovative products, two biosimilars, and generated a significant number of innovative andfirst-in-class molecules in our portfolio. (For complete information regarding our significant pipeline advancements, please refer to our Form10-KTSR for the year ended December 31, 2018.)three-year period.
Pipeline Launches.
We launched two important innovative products in 2018 in the U.S. in two different therapeutic areas:
Aimovig (migraine), the first calcitonin gene-related peptide (CGRP) inhibitor approved for the preventive treatment of migraine in adults. Migraine is a debilitating condition that continues to have a significant lasting impact on the lives of patients and society at large. In 2018, we served more than 150,000 patients with Aimovig.
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36 ï 2019 Proxy Statement
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We advanced our early pipeline with approximately 20 unique oncology assets in development.
In the oncology pipeline, we are advancing approximately 20 early-stage product candidates in therapeutic indications ranging from solid tumors (including small-cell lung cancer) and hematological malignancies (including multiple myeloma and acute myeloid leukemia). We have designed these development programs to rapidly establishproofs-of-concept and generate data to support our move into the pivotal phase so that we may get these innovative therapies to patients as quickly as possible.
We executed key clinical studies and regulatory filings.
In Oncology:
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In Cardiovascular Disease:
Cardiovascular disease is the costliest disease for society today. In the absence of new therapies to reduce the risk of cardiovascular events for the millions of high risk patients in the U.S. and around the world, the social and financial burden of this disease is projected to rise rapidly. In 2018, we continued to advance our cardiovascular disease program to address this unmet need.
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ï 2019 Proxy Statement 37
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In Inflammatory Disease:
Respiratory disease is one of the leading causes of death in the world.
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In Bone Health:
Osteoporotic fractures are a significant medical problem for patients, often require hospitalization, and can be very expensive to treat. In 2018, we continued to invest in bone health:
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In Biosimilars:
Our deep experience in biologics development and capabilities in biotechnology manufacturing is an important contributor to our success in the emerging biosimilars market. In our biosimilars portfolio in 2018, we had the following progress in our clinical studies and regulatory filings:
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3. We delivered on our annual priorities to execute critical launches and long-term commercial objectives.
Revenue growth (4%) benefited from double-digit, volume-driven sales growth from a number of our innovative medicines that address unmet medical needs in serious illnesses, including Repatha in cardiovascular disease, Prolia in osteoporosis, and KYPROLIS in cancer.
Repatha worldwide sales increased 72% in 2018, but this growth fell short of our aspirations due to access and affordability challenges in a competitive market. Given the gravity of the impact of cardiovascular disease, we took significant actions to address these challenges for patients who would benefit from Repatha.
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We realized our 2014-2018 commitments to investors and our transformation objectives.
2018 was the capstone year for a set of ambitiousnon-GAAP financial commitments we made to our stockholders five years ago, including earnings per share, or EPS, growth, operating margin improvement, and return of capital that we met and exceeded through significant transformation and process improvement efforts. The benefits of our transformation continue in the productivity capabilities we have embedded in our business to reallocate resources to our pipeline and growth opportunities putting us in a better position to serve patients and deliver long-term growth.
We invested for long-term growth while returning substantial capital to our stockholders.
Between 2011 and 2018, we have increased our global presence to approximately 100 countries from 50. In 2018, we also marked the milestone of securing our first product approval in China (Repatha) and received the first approval in the world for EVENITY in Japan.
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38 ï 2019 Proxy Statement
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Our next-generation biomanufacturing plant incorporates multiple innovative technologies and can be built in less time and operate at one half of the operating costs of a traditional plant. Next-generation biomanufacturing plants have a smaller manufacturing footprint and offer greater environmental benefits, including reduced consumption of water and energy and lower levels of carbon emissions. In 2018, we successfully operated our next-generation manufacturing facility in Singapore and broke ground on our U.S. facility.
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We have built leading patient- and provider-friendly device capabilities, and continue to invest in such products. Innovations that make the delivery of our medicines easier and less costly are good for patients, have positive economic benefits to the healthcare system, offer important opportunities for differentiation, and contribute to our life cycle management strategies for our mature brands.
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Our strong cash flows and balance sheet allowed continued investment for long-term growth in 20182019 through internal research and development ($3.7 billion),and capital expenditures, ($738 million), and external business development transactions (including the acquisition of Otezla and our equity stake in BeiGene), while simultaneously providing substantial returns to stockholders.
• | Otezla Acquisition.The acquisitionof Otezla, the only oralnon-biologic treatment for psoriasis and psoriatic arthritis, offers many benefits, including: |
| - | A strong strategic fit with our long-standing expertise in psoriasis and inflammation; |
| - | A differentiated, oral therapy complementary to our existing inflammation franchise of innovative biologics and biosimilar products; and |
| - | Worldwide rights enhancing our global geographic expansion objectives. |
| • | BeiGene Ltd. Equity Stake.To support the development of our early oncology pipeline and our global geographic expansion objectives, we entered into a collaboration with BeiGene, a research-based, oncology-focused biotechnology company with an established, experienced team in China, the world’s second-largest pharmaceutical market. BeiGene will commercialize three of our products in China (XGEVA®, KYPROLIS®, and BLINCYTO®) and we and BeiGene will collaborate to advance 20 medicines from our innovative oncology pipeline in China and globally. In support of this collaboration, we took a 20.5% equity stake in BeiGene. |
In 2018,2019, whileinvesting $3.7$4.1 billion in
research and development and,$738618 million in capital expenditures, and$13.6 billion in acquisitions, we also allocatedreturned $21.4$11.2 billion of capital for return to our stockholders ($17.97.7 billion in stock repurchases and
$3.5 $3.5 billion of dividends)
We increased our quarterly dividend per share 10% over 2018 (to $1.45 per share per quarter for 2019). Our dividend per share increased 418% since the inception of our dividend in 2011.
Annual Dividend Increases
We increased our quarterly dividend per share 15% over 2017 (to $1.32 per share for 2018). Our dividend per share increased 371% since the inception of our dividend in 2011.
We repurchased approximately $17.9 billion of our shares, including a tender offer to repurchase $10 billion in shares.
Performance Under Our Long-Term Incentive Program
Our long-term incentive, or LTI, compensation is tied directly to our stock performance and aligns with the interests of our stockholders.
80% of our annual LTI equity award grants are performance-based, aligning compensation with value creation for our stockholders. Performance units comprise 50% of our LTI equity award grants. For 2016-2018, the goal design and all measurement targets were established at the beginning of this three-year performance period and were earned based on our performance on the three equally weightednon-GAAP operating measures of EPS growth, operating margin, and operating expense as measured against each of thepre-established annual targets for each of the three years. Thesenon-GAAP operating measures were chosen to drive performance in alignment with, and focus our executives on, our 2014-2018 investor commitments discussed earlier. At the end of the performance period on December 31, 2018, the operating measure percentages were averaged, resulting in a total operating measures score of 115.4% driven by our strong EPS growth and improved operating margins over the period.
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ï 20192020 Proxy Statement 3941
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Compensation Discussion and Analysis
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Earned amounts from our 2019 annual cash incentive compensation program are tied directly to our performance based onpre-established financial and operating performance goals designed to drive execution of our strategic priorities.
Goal
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| Weighting
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% of Target Earned
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1. Financial Performance | ||||||
Revenues Target $22.1B Results $23.4B
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30%
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177%
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Non-GAAP Net Income(1) Target $8.2B Results $9.0B
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30%
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168%
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2. Progress Innovative Pipeline
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Advance Early Pipeline
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10% |
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100% | ||
Execute Key Clinical Studies and Regulatory Filings
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20%
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80%
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3. Deliver Annual Priorities
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Execute Critical Launches and Long-Term Commercial Objectives
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5%
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77%
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Achieve Productivity Objectives
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5%
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107%
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Final Score
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Achieved 138.9%
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1. Our financial performance was strong in a year of transition.
In March 2019, when we established our 2019 performance goals, we expected to drive volume growth in our newer products, but we also anticipated substantial competition against our legacy products due to patent expiries that would more than offset newer product sales growth. Our early 2019 investor guidance also reflected this anticipated competitive intensity.
In 2019, we grew product volumes by 3% globally. And, despite the anticipated competitive headwinds, we outperformed our budgeted financial targets and exceeded our original guidance as we retained more of our legacy product sales than expected, drove our newer product volume growth, and added Otezla to our product portfolio.
Our 2019 revenues benefited from volume-driven growth from a number of our newer innovative medicines that grew units double digit or better, including Repatha®, Parsabiv®, BLINCYTO, Aimovig®(2), and Prolia®. Overall 2019 revenues decreased 2% to $23.4 billion reflecting
the impact of biosimilar and generic competition against our mature products. Lower product sales were affected by lower net selling price, offset partially by higher unit demand.
Ournon-GAAP net income performance also benefited from our success in retaining more of our mature product sales, driving unit growth of our newer products, and the favorable productivity savings resulting from our strong performance of our “Achieve Productivity Objectives” annual goal discussed further below.
2. We progressed our pipeline(3).
2019 Pipeline Launches.
| • We launched EVENITY, an innovative product for the treatment of osteoporosis in postmenopausal women at high risk of fracture, in the U.S., Canada, Japan, South Korea, and Australia(4). | |
| • We also launched two oncology biosimilars in the U.S.: -MVASI(biosimilar bevacizumab (Avastin®)), the first oncology therapeutic biosimilar approved by the U.S. Food and Drug Administration, or FDA, was approved for all approved indications of Avastin. | |
-KANJINTI (biosimilar trastuzumab (Herceptin®)) was approved for all approved indications of Herceptin. |
In 2019, we advanced our early pipeline and executed key clinical studies and regulatory filings.
We generated eight new product teams (formed when a molecule has been judged to have the potential to be safe and effective in humans).
We initiated sevenfirst-in-human studies.
We advanced four programs through theearly-to-late stage portal (the period covering Phase 2 through Phase 3).
Oncology:
We advanced ourearly oncology programs with approximately 17 individual therapeutics in development.Early data readouts from this pipeline have been promising, including forAMG 510
| (1) | Non-Generally Accepted Accounting Principles, ornon-GAAP, net income for purposes of the 2019 Company performance goals of our annual cash incentive award program is reported and reconciled inAppendix B. |
| (2) | Jointly developed in collaboration with Novartis AG. |
| (3) | For complete information regarding our significant pipeline advancements, please refer to ourForm 10-K for the year ended December 31, 2019. |
| (4) | EVENITY is also approved in Japan and South Korea for men at high risk for fracture and in Australia as a treatment to increase bone mass in men with osteoporosis at high risk of fracture. |
42 ï 2020 Proxy Statement
Compensation Discussion and Analysis |
(our KRASG12C small molecule inhibitor being investigated as a treatment for a variety of solid tumors): |
| - | The FDA grantedOrphan Drug Designation for previously treated metastaticnon-small cell lung cancer, or NSCLC, and colorectal cancer with KRASG12C mutation andFast Track Designation for previously treated metastatic NSCLC with KRASG12C mutation. |
| - | We enrolled a potentially pivotal Phase 2 monotherapy study in advanced NSCLC, and began enrollment of colorectal cancer patients in a Phase 2 monotherapy study. |
| • | We submitted an FDA Biologics License Application forABP 798 (biosimilar rituximab (Rituxan®)). |
In ourmarketed oncology therapeutics, we invested in studies that expanded treatment options for patients:
| - | For KYPROLIS (our medicine for patients with relapsed or refractory multiple myeloma), the Phase 3 CANDOR(1)study (evaluating KYPROLIS in combination with dexamethasone and DARZALEX® compared to KYPROLIS and dexamethasone alone) met its primary endpoint of progression-free survival. |
| - | Nplate®(our medicine to treat low blood platelet count) was approved for earlier use in adults with immune thrombocytopenia; and |
| - | BLINCYTO (our medicine for patients with acute lymphoblastic leukemia) was approved for patients with Philadelphia chromosome negative minimal residual disease-positiveB-cell precursor acute lymphoblastic leukemia in the European Union. |
Cardiovascular Disease:
We launchedRepatha® in China as the first PCSK9 inhibitor for adults with established atherosclerotic cardiovascular disease to reduce the risk of myocardial infarction, stroke, and coronary revascularization.
Inflammatory Disease:
| • | Received aBreakthrough Therapy designation forTezepelumab(2) (our medicine in Phase 3 development for asthma) in patients with severe asthma without an eosinophilic phenotype. |
| • | The FDA approvedAVSOLA (biosimilar infliximab (Remicade®)) for all approved indications of Remicade. |
Bone Health:
Received approval forEVENITY in the European Union for the treatment of severe osteoporosis in postmenopausal women at high risk of fracture.
3. We delivered on our annual priorities.
We executed on our critical launches and long-term commercial objectives.
As discussed above, our revenues benefited from volume-driven growth from a number of our newer innovative medicines, including those medicines that were the focus of our annual priorities to execute critical launches:
| • | Prolia(our medicine for patients with osteoporosis) worldwide sales increased 17% in 2019. |
Aimovigworldwide sales increased 157% in 2019.
Repatha worldwide sales increased 20% in 2019. Given the gravity of the impact of cardiovascular disease, we took significant actions to address access challenges for patients who would benefit from Repatha, including:
| - | Efforts to Improve Access.To address access challenges, we have offered payers significant rebates on Repatha in exchange for improved patient access. |
| - | Action to Increase Affordability.In the U.S. we established a 60% lower list price to address affordability for patients, particularly those on Medicare. Beginning January 2020, Repatha is available exclusively at this 60% lower list price. |
We achieved our productivity objectives.
We began realizing the benefit of the productivity initiatives embedded in our business. In 2019, as a result of our focus on productivity to support continued reinvestment opportunities, we achieved gross savings of approximately $286 million. Part of these savings have been invested into our research and development activities. We expect savings from these productivity initiatives will continue to contribute to funding strategic growth investments, such as investment in our early oncology programs.
We delivered on additional strategic priorities.
In 2019, in addition to launching Repatha as our first product in China, we made significant progress in expanding our presence in China and Japan, the second and third largest pharmaceutical markets, respectively.
| (1) | Carfilzomib, Daratumumab and Dexamethasone for Patients With Relapsed and/or Refractory Multiple Myeloma. |
| (2) | Jointly developed in collaboration with AstraZeneca plc. |
ï 2020 Proxy Statement 43
Compensation Discussion and Analysis |
We entered into a strategic collaboration with BeiGene Ltd. to collaborate on the commercialization of XGEVA, KYPROLIS, and BLINCYTO in China and the global development and commercialization of 20 Amgen oncology pipeline products.
With EVENITY, we realized our third product approval in three years in Japan through our Amgen Astellas BioPharma K.K. joint venture.
We executed our first biosimilar launch in the Asia-Pacific region with the launch of MVASI in Thailand. This was also the fourth biosimilar launch for Amgen globally.
We acquired Otezla, with approvals around the world, providing an attractive international growth opportunity.
In 2019, we successfully operated our next-generation manufacturing facility in Singapore and continued to work on the construction of our U.S. facility in Rhode Island.
• | Rhode Island Facility.In 2019, to support expected product volume growth, we continued construction on our first U.S. next-generation biomanufacturing plant in Rhode Island. This new plant will be the first of its kind in the U.S., is anticipated to create a substantial number of additional highly skilled manufacturing positions in the U.S., and will employ our next-generation biomanufacturing capabilities. |
Performance Under Our Long-Term Incentive Program
Pay delivery from our LTI compensation plan is tied directly to our stock performance and aligns with long-term value creation for our stockholders.
80% of our annual LTI equity award grants are performance-based, aligning compensation with long-term value creation for our
stockholders. Three-year performance units comprise 50% of our annual LTI equity award grants. The goal design and all measurement targets are established at the beginning of the three-year performance period and, for the 2017-2019 performance period, were earned based on our performance as measured against thesepre-established annual targets for the three equally weightednon-GAAP operating measures of earnings per share, or EPS, growth, operating margin, and operating expense (in 2017 and 2018) and EPS growth, operating margin, and return on invested capital, or ROIC (for 2019). Thesenon-GAAP operating measures were chosen to drive performance in alignment with, and focus our executives on, our 2014-2018 investor commitments, which included EPS growth, operating margin improvement, and operating expense reduction through significant transformation improvement efforts. For the third year of the 2017-2019 performance period (2019), the Compensation Committee replacednon-GAAP operating expense withnon-GAAP ROIC in response to stockholder feedback, as well as our goal of delivering an efficient disciplined business model beyond 2018. At the end of the 2017-2019 performance period, our performance under the three annual operating measure percentages was averaged, resulting in a total operating measures score of 103.7% driven by our strongnon-GAAP EPS growth over the period.
The total operating measures score iswas then increased or decreased based on our relative TSR performance as compared to the companies in the S&P 500.500 over the three-year performance period. Our strong TSR performance ranking (65.2%)(77.8th percentile) relative to the TSRs of the companies in the S&P 500 overfor the three year
three-year performance period resulted in a TSR modifier for the 2017-2019 performance period of +30.3%+50 percentage points and a payout of 145.7%153.7% of target performance units granted. A detailed depiction of this calculation is on the next page.
44 ï 2020 Proxy Statement
Compensation Discussion and Analysis |
2017-2019 Performance Period Goal Design and Award Calculation
All operating measures and goals were established at the
beginning of the operatingthree-year performance measure results shown below were determined on anon-GAAPperiod basis.
2019 Operating Measures and Performance
| Non-GAAP(1) Operating Measures | Minimum (50%) | Target (100%) | Intermediate (125%) | Maximum (150%) | 2019 Performance | |||||||||||||||||||||||
| EPS Growth ($) | 136.8% $14.75 | ||||||||||||||||||||||||||
£$11.60 | $12.75 | $14.35 | ³$15.20 | |||||||||||||||||||||||||
Operating Margin (%) | 75.3% 50.0% | |||||||||||||||||||||||||||
£48% | 52% | 54% | ³58% | |||||||||||||||||||||||||
ROIC (%) | 66.6% 30.7% | |||||||||||||||||||||||||||
£30% | 32% | – | ³36% | |||||||||||||||||||||||||
| 92.9% | |||||||||||||||||||||||||||
2016-2018 Operating Measures Score (Operating Measure Percentages 50 – 150% with linear
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Operating Measures Percentages are Equally Weighted for Each of the Three Years
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| Non-GAAP(1) Operating Measures
| 2016
| 2017
| 2018
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2016-2018
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EPS Growth ($) |
137.0% ($11.65)
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128.8% ($12.74) |
142.9% ($14.37) |
136.2% | ||||
Operating Margin (%) |
128.6% (52.3%)
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134.7% (54.2%) |
106.6% (52.5%) |
123.3% | ||||
Operating Expense (in billions)
| 94.4% ($11.54) | 115.6% ($11.04) | 50.0% ($11.91) | 86.7% | ||||
120.0%
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126.4% |
99.8% |
115.4% | |||||
2017-2019 Operating Measures Score (Operating Measure Percentages 50 – 150% with linear
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| Operating Measure Percentages are Equally Weighted for Each of the Three Years | ||||||||
| Non-GAAP(1) Operating Measures | 2017(2) | 2018(2) | 2019 | 2017-2019 Average Operating Measures | ||||
EPS Growth ($) | 133.8% ($12.74) | 142.9% ($14.37) | 136.8% ($14.75) | 137.8% | ||||
Operating Margin (%) | 114.5% (54.2%) | 106.6% (52.5%) | 75.3% (50.0%) | 98.8% | ||||
Operating Expense Years 1 & 2 (in billions) | 107.0% ($11.04) | 50.0% ($11.91) | 74.5% | |||||
ROIC (%) Year 3 | 66.6% (30.7%) | |||||||
118.4%
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99.8%
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92.9%
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103.7%
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Payout for Performance Relative to S&P 500 TSR Percentage | ||||||||||||||||||||
Amgen TSR³ 75th percentile = 50% (Maximum) | Actual Amgen percentile ranking 77.8th percentile resulting in a +50% score | |||||||||||||||||||
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Amgen TSR = 50th percentile | ||||||||||||||||||||
Amgen TSR£ 25th percentile =-50% (Minimum)
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Final 2016-2018 Performance Period Calculation 2016-2018 Non-GAAP(1) Operating Measures EPS Growth (1/3rd) Operating Margin (1/3rd) Operating Expense (1/3rd) 115.4% 2016-2018 Amgen Relative TSR Performance 30.3% Final Payout 145.7%
| (1) | The operating measures of the |
| (2) | Our targets for our 2017 and 2018 performance were disclosed under the 2017-2019 performance goals in our 2018 and 2019 proxy statement, respectively, filed with the Securities and Exchange Commission on April 11, 2018 and April 8, 2019, respectively. |
| (3) | TSR Measurement Points = Average daily closing price of stock for the first 20 trading days beginning on the grant date (May 1, 2017) and the last 20 trading days of the performance period (December 31, 2019). |
40 ï 20192020 Proxy Statement 45
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Compensation Discussion and Analysis
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Positive 20182019 Say on Pay Vote Outcome and Engagement With Our Stockholders
In 2018,2019, we received approximately 95%93% stockholder support on our say on pay advisory vote. We have engaged consistently in broad direct governance-focused stockholder outreach over the past several years.since 2011. Since our 20182019 annual meeting of stockholders, in addition to outreach by our executives and Investor Relations department to our investors owning approximately 58% of our outstanding shares, we have engaged in governance-focused outreach activities and discussions with stockholders owning approximately 53%51% of our outstanding shares. These discussions have been valuable and informative and we will
continue to engage with our stockholders to further enhance our understanding of the perspectives of our investors.
In 2018,2019, the predominant feedback from investors with respect to our compensation and governance practices was that they are satisfied with our compensation program and governance practices. We are pleased with our say on pay results and stockholder feedback, and will continue to engage with our stockholders to be sure we understand and address any concerns.
Long-Term Incentive Equity Award Design Changes in 20182019
In December 2018 the Compensation and Management Development Committee, orMarch 2019, the Compensation Committee evaluated potentialand established a performance award goal designsdesign for the 2018-20202019-2021 performance period (January 1, 20182019 to December 31, 2020)2021) with input from management and FW Cook, to take into account discussions with our stockholders, and to continue to drive operating performance and financial discipline. Our LTI performance units have annual operating performance measures and goals that are established at the beginning of the three year performance period. For the 2018-20202019-2021 performance period, the Compensation Committee decided to retainretained the threenon-GAAP operating measures of EPS growth, operating margin, and operating expense for the annual 2018 operating measures to remain consistent with the 2018 annualsame general performance measures of the 2017-2019 performance period.For the second and third years (2019 and 2020) of the 2018-2020 performance period, the Compensation Committee selected EPS growth and Return on Invested Capital, or ROIC(which are two of the threenon-GAAP operating measures used for2019 of the 2017-2019 performance period). The Compensation Committee retained EPS growth to incentivize continued focus on investor commitments and delivering stockholder value, and added ROIC to emphasize ouraward goal of remaining disciplined in our management of the business and use of capitaldesign as we move beyond our 2014-2018 investor commitments discussed earlier. Our performance
against the operating measure targets are calculated for each year of the 2018-2020 performance period and these operating measure percentages are averaged at the end of the performance period, resulting in a total operating measures percentage that can range from 30% for minimum to 170% for maximum performance. The total operating measures percentage is then modified by an increase or decrease of up to 30 percentage points based on how our TSR ranks relative to the TSRs of the companies in the S&P 500 over the performance period. The Compensation Committee determined to reduce the TSR modifier from 50 to 30 percentage points for the 2018-2020 performance period, to rebalance the weighting of this period’s goal design in favor of the operating measures to further emphasize the Company’s operational priorities while maintaining alignment of our performance with the long-term value created for our stockholders. The Compensation Committee also retainedincluding the requirement that the TSR modifier cannot exceed target (100%) regardless of our relative TSR performance if our absolute TSR over the performance period is less than 0.zero. This feature provides a greater tie to stockholders’ interests and investment
experience. The Compensation Committee moved to using two operating measures, retaining the twonon-GAAP operating measures of EPS growth and ROIC used for the last two years of the 2018-2020 performance period for the entire 2019-2021 performance period to continue to incentivize focus on delivering stockholder value and to emphasize our goal of remaining disciplined in our management of the business and use of capital, respectively. These operating measures are weighted equally(one-half per measure). A detailed depiction of the 2018-20202019-2021 performance period goal design can be found in “Performance Award Goal Design for the 2018-20202019-2021 Performance Period—2018-20202019-2021 Performance Period Goal Design and Award Calculation.”
20192020 Proxy Statement 41
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Compensation Discussion and Analysis
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Our 20182019 Compensation Program Highlights and Objectives
Total Target Direct Compensation Focuses on “At Risk” Compensation ( |
2018 Total Target Direct Compensation Mix 76% 14% 10% 90% At Risk CEO 90% pay at risk 75% performance based 17% 17% 66% 83% At Risk other NEOs* 83% pay at risk 69% performance based Purpose LTI Equity Awards Provide a direct link to the creation of stockholder value and execution on our strategy Align NEO's interests with stockholders Foster long-term focus and retention Annual Cash Incentives Measure NEO's performance against pre-established Company performance goals Align all staff members around the same Company performance goals as all such annual cash incentive awards are based on these goals Motivate NEOs to meet or exceed our Company performance goals to drive annual performance and position us for longer-term success via our strategy Base Salary Provides a degree of financial certainty that helps us retain talent Recognizes competitive market conditions and/or rewards individual performance through periodic increases LTI Equity Award Allocation: 80% Performance Based 50% Performance Units 30% Stock Options 20% Restricted Stock Units All preceding pie charts are calculated using (i) the "Salary" column from the "Summary Compensation Table" in our Executive Compensation Tables (ii) the target annual cash incentive cash incentive award in the "Estimated Possible Payouts Under Non-Equity Incentive Plan Awards - Target" column in the table in footnote 3 to the "Grants of Plan-Based Awards" table in our Executive Compensation Tables and (iii) the grant date fair value of annual grants of performance units, restricted stock units, or RSUs and stock options in the "Grant Date Fair Value of Stock and Option Awards" column of the "Grants of Plan-Based Awards" table in our Executive Compensation Tables.
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42 ï 2019 Proxy Statement
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LTI Equity Awards (“At Risk”)
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ï 20192020 Proxy Statement 43
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What we do
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44 ï 2019 Proxy Statement47
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Compensation Discussion and Analysis
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How Compensation Decisions Are Made For Our Named Executive Officers
Roles and Responsibilities
Compensation Committee Composed solely of independent directors and reports to the Board
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• Evaluates the performance of our CEO within the context of the financial and operational performance of the Company. • Determines and approves compensation packages for our CEO, other NEOs, Executive Vice Presidents, Senior Vice Presidents, and Section 16 officers (collectively, “Senior Management”).
• Reviews and approves all compensation programs in which our NEOs participate.
• Oversees the development and effective succession planning of our CEO and other members of Senior Management annually. • Exercises the sole authority to select, retain, replace, and/or obtain advice from compensation consultants, legal counsel, and other outside advisors and assesses the independence of each such advisor, taking into consideration the factors set forth in the Securities and Exchange Commission, or SEC, rules and The NASDAQ Stock Market listing standards.
• Oversees the Board’s relationship with and response to stockholders on executive compensation matters and the Compensation Discussion and Analysis.
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Consultant to the Compensation Committee Frederic W. Cook & Co., Inc., Independent consultant retained directly by the Compensation Committee
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• Regularly attends Compensation Committee meetings, including meeting in executive session with the Compensation Committee. • Provides advice and studies on the appropriateness and competitiveness of our compensation program relative to market practice for our NEO compensation.
• Provides advice and studies on our equity programs.
• Provides advice on the selection of our peer group.
• Consults on executive compensation trends and developments. • Consults and makes recommendations, when requested, on various compensation matters and compensation program designs and practices to support our business strategy and objectives.
• Coordinates and reviews the appropriateness of market data compiled by management.
• Works with management to assess the potential risks arising from our compensation policies and practices. |
CEO Assisted by the |
• Conducts performance reviews of the other NEOs and makes recommendations to the Compensation Committee with respect to compensation of Senior Management other than himself.
• Provides recommendations on the development of and succession planning for the members of Senior Management other than himself. |
Annual performance reviews for each staff member (including NEOs) include an assessment of delivery of performance in alignment with our Amgen Values, a set of principles established in 1996 that guide the way we conduct business: | ||||||
| Amgen Values: | ||||||
• Be science-based; | • Trust and respect each other; | |||||
• Compete intensely and win; | • Ensure quality; | |||||
• Create value for patients, staff, and stockholders; | • Work in teams; and | |||||
• Be ethical; | • Collaborate, communicate, and be accountable. | |||||
20192020 Proxy Statement 45
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Compensation Discussion and Analysis
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Use of Independent Compensation Committee Consultant
To assist the Compensation Committee in its review and determination of executive compensation, the Compensation Committee retained and sought advice from FW Cook, an independent consultant. George B. Paulin, the Chairman of FW Cook, worked directly with the Compensation Committee in the roles and undertaking the responsibilities previously described in “How Compensation Decisions Are Made For Our Named Executive Officers” and specifically in 20182019 provided consultation regarding regulatory updates, selection of our peer group, consultation on market competitiveness for our LTI equity award practices, competitive practice for CEO compensation, and general market practices for NEO compensation.
On a periodic basis, the Company purchases proprietary executive compensation survey data from FW Cook to inform the Compensation Committee’s decisions, but does not engage FW Cook for any other services to the Company. During 2018,2019, the Compensation Committee, as in past years, had responsibility for engaging FW Cook and directed the nature of the activity and interchange of data between FW Cook and management. The Company did not engage FW Cook for any other services to the Company.
The Compensation Committee recognizes the unique demands of our industry, including its complex regulatory and reimbursement environment, and the challenges of running an enterprise focused on the discovery, development, manufacture, and commercialization of innovative medicines to address serious illness. The Compensation Committee believes that these unique demands require executive talent that has significant industry experience as well as, for certain key functions, specific scientific expertise to oversee research and development activities and the complex manufacturing requirements for biologic products. Further, the Compensation Committee believes that these very particular skills and capabilities limit the pool of talent from which we can recruit and also cause our employees to be highly valued and sought after in our industry.
On an annual basis, FW Cook reviews our peer group with the Compensation Committee to determine whether the peer group remains appropriate. In 2019, FW Cook recommended adding Regeneron Pharmaceuticals, Inc.continuing the objective criteria previously established and making no changes to the peer group for 2018 because this company fully satisfies the objective criteria for inclusion described in the following chart and, as such, is appropriate for executive compensation benchmarking.group. Based, in part, on these recommendations from FW Cook, as well as a review of the objective criteria, the Compensation Committee added Regeneron Pharmaceuticals, Inc. todetermined that the current peer group for 2018.remained appropriate.
46 ï 20192020 Proxy Statement 49
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Compensation Discussion and Analysis
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How We Establish Our Peer Group
Biotechnology and pharmaceutical companies with which we compete for executive talent. | ||||
Objective Criteria Considered
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(Companies in blue also list Amgen as a peer)
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• GICS codes of biotechnology (352010) and pharmaceuticals (352020);
• 12-month average market capitalization between 0.25 and 4.0x that of Amgen’s average market capitalization for the same period(1);
• Trailing four-quarter revenues between 0.25 and 4.0x that of Amgen’s revenues(1);
• Non-U.S. peers limited to those commonly identified as a “peer of peers”;
• Competitors for executive talent;
• Companies of comparable scope and complexity;
• Competitors for equity investor capital;
• Companies that identify us as their direct peer; and
• Companies with similar pay practices. | • AbbVie Inc.
• Allergan plc
• AstraZeneca plc
• Biogen Inc.
• Bristol-Myers Squibb Company
• Celgene Corporation
• Eli Lilly and Company
• Gilead Sciences, Inc. • GlaxoSmithKline plc
• Johnson & Johnson
• Merck & Co., Inc.
• Novartis AG
• Pfizer Inc.
• Regeneron Pharmaceuticals, Inc.
• Roche Holding AG
• Sanofi S.A. | |||
| (1) | For purposes of the |
Market Capitalization(a) |
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Amgen | $ |
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Relative Peer Group Position | 3rd Quartile (above median) |
| 2nd Quartile |
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| (a) | Represents the12-month average market capitalization as of May 31, |
| (b) | Represents revenues for the trailing four quarters ended March 31, |
Peer Group Data Sources
Our primary data sources for evaluating all elements of compensation for our CEO is data compiled by FW Cook from SEC filings of our peer group, including for the 25th, 50th, and 75th percentiles of the specific compensation elements paid to CEOs in our peer group. For our other NEOs, our primary data sources for evaluating all elements of compensation are the Willis Towers Watson Pharmaceutical Human Resources Association Executive Compensation Survey, or PHRA Survey, which provides peer company data, augmented by the available data from proxy statements filed with the SEC for companies in our peer group. The Executive Vice President, Global Commercial Operations role is well-matched in the PHRA Survey. However, the role
is not consistently well-represented in the peer group proxy statements
and, as a result, to reflect the scope and criticality of the role, is instead benchmarked to the second highest paid named executive officers in such filings. Solely for the determination of LTI equity awards, we also provide data from the FW Cook Survey of Long-Term Incentives (FW Cook Survey). Based on this data, the Compensation Committee is presented with a comparison of each NEO on a position or pay rank basis with an analysis of each element of direct compensation for such NEO at the 50th and 75th percentile of the peer group. Because PHRA Survey and proxy statement data is only available for the previous calendar year, consistent with generally accepted practice, base pay data is aged forward to the current year based on expected salary movement. Annual cash incentive award and LTI equity award market data are not adjusted for aging.
The “Market Median” is determined for our CEO and our other NEOs based on the prior year’s compensation and is reviewed by the Compensation Committee to inform compensation decisions made in March of each year as follows:
Market Median
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| |||||
CEO(compiled by FW Cook)
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Other NEOs
| |||||
• 50th percentile of each compensation element paid to CEOs in our peer group in the previous year from proxy statements. | • Average of the 50th percentile of each compensation element of our peer group from the PHRA Survey and proxy statements in the previous year (with base pay data aged forward to the current year) except for the Executive Vice President, Global Commercial Operations role as described above. | |||||
20192020 Proxy Statement 47
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Compensation Discussion and Analysis
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Elements of Compensation and Specific Compensation Decisions
Described below are our three primary elements of executive compensation in order of magnitude: LTI equity awards; annual cash incentive awards; and base salaries.
Long-Term Incentive Equity Awards
Our compensation program aims to achieve the appropriate balance of compensation elements relative to the responsibilities of our staff members, with the result that the largest proportion of compensation for our CEO and the other NEOs is in the form of LTI equity awards that are risk-based and closely aligned with the creation of long-term stockholder value. For 2018,2019, equity-based compensation represents 76%78% of our CEO’s target compensation and 66%65% of target compensation for our other NEOs, and 50% of annual equity awards are in the form of long-term performance units. In addition, while being mindful of stockholder dilution (see below), we also grant LTI equity awards each year to nearly all of our staff members worldwide to increase staff awareness of how our performance impacts stockholder value. We believe that our practice of granting equity-based compensation broadly has been a significant factor in advancing our strategic priorities by aligning all of our staff members’ (including our NEOs’) interests with those of our stockholders, rewarding execution of our strategy, fostering long-term focus, and enhancing retention.
We Continue to Exercise Discipline in the Grant of Long-Term Incentive Equity Awards—Monitoring Dilution and Annual Equity Usage
Our compensation philosophy, practices, and approach balanceCompensation Committee balances the use of equity to align staff members with our stockholders while being mindfulstriving to limit stockholder dilution to that amount which investors would expect to experience with members of the level of dilution that our stockholders experience.peer group. Annually, LTI equity award grant guidelines are established for each Company job level within the Company targeting the 50th percentile of our peer group for levels for which equity data is broadly available. For certain lower job levels where data is not as comprehensive, we have developed guidelines that trendin-line with available, data and consider internal equity. The Compensation Committee also setssetting an annual LTI equity award budget at approximately the 50th percentile of our peer group. Further, the Compensation Committee annually reviewsgroup, and reviewing the Shareholder Value Transfer (SVT) associated with the proposed aggregate LTI equity award grants to ensure that our SVT is aligned with our peer group practices because, while the Compensation Committee supports delivery of broad-based equity awards to drive alignment of our staffpractices. (For certain lower job levels where data is not as comprehensive, we have developed guidelines that trendin-line with our stockholders, the Compensation Committee also strives to limit stockholder dilution to that amount which investors would expect to experience with members of our peer group.available data and consider internal equity.) As illustrated, the resulting dilutive effect has been trending downward to essentially flat over the past seven years.generally trended downward.
Long-Term Incentive Equity Award Mix
As part of its annual evaluation of our LTI equity award practices, the Compensation Committee reviewed our LTI equity award mix with FW Cook and elected to maintain the previous year’s LTI equity award allocation for 20182019 given itspay-for-performance alignment.
LTI Equity Award Allocation
For 2018, As such, 80% of our annual equity award value continued to be delivered as performance-based LTI equity awards consisting of 50% performance units (earned at the end of a three-year performance period)(50%) and 30% stock options.options (30%). Time-vested RSUs, designed to foster retention, continued to comprise the remaining 20% of equity value. Both our stock options and RSUs generally vest over four years (with no vesting in the first year and vesting in three approximately equal annual installments on the second, third, and fourth anniversaries of the grant date). The delay in the commencement of vesting furthers the longer-term performance emphasis of our LTI equity award program and enhances retention.
LTI Equity Award Allocation
48 ï 2019 Proxy Statement
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Value of 2018 Long-Term Incentive Equity Awards
Based on a review of Company and executive performance and market data, the Compensation Committee determined to grant the following LTI equity award grant values to our CEO and the other NEOs in March 2018, with an effective grant date of April 27, 2018, the third business day after the announcement of our first quarter 2018 earnings results (with the exception of Mr. Gordon who joined the Company in September 2018). (For more information regarding the determination of the Market Median, see “How Compensation Decisions Are Made For Our Named Executive Officers—Peer Group Data Sources” previously discussed.)
| Named Executive Officer | Performance Units(1) ($) | Stock Options ($) | Restricted Stock Units ($) | Total Equity Value Granted ($) | 2017 Market Median ($) | Difference vs. Market Median Over/ (Under) (%) | ||||||||||||||||||
Robert A. Bradway | 6,250,000 | 3,750,000 | 2,500,000 | 12,500,000 | 11,000,000 | 13.6 | ||||||||||||||||||
Anthony C. Hooper | 2,000,000 | 1,200,000 | 800,000 | 4,000,000 | 3,993,938 | 0.2 | ||||||||||||||||||
Murdo Gordon(2) | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||
Sean E. Harper | 2,000,000 | 1,200,000 | 800,000 | 4,000,000 | 3,740,699 | 6.9 | ||||||||||||||||||
David W. Meline | 2,000,000 | 1,200,000 | 800,000 | 4,000,000 | 3,555,907 | 12.5 | ||||||||||||||||||
David M. Reese(3) | 450,000 | 270,000 | 180,000 | 900,000 | n/a | n/a | ||||||||||||||||||
Jonathan P. Graham | 1,400,000 | 840,000 | 560,000 | 2,800,000 | 2,583,298 | 8.4 | ||||||||||||||||||
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Based on the March 2018 Compensation Committee review of the market data, the Compensation Committee awarded Mr. Bradway a 2018 LTI equity award grant valued at $12.5 million, which is approximately 4% higher than the value of his grant in 2017 of $12 million and 13.6% above the Market Median to reward Mr. Bradway for strong performance and continued and consistent leadership of the Company in a year of transition. In making its decision, the Compensation Committee noted that the Market Median had declined because of leadership turnover at a number of companies in our peer group while peer group LTI equity awards for CEOs who had remained in place had increased by 10%. Further, Mr. Bradway’s total target annual cash compensation was slightly below the Market Median. The Compensation Committee’s determination of the appropriateness of the grant value awarded to Mr. Bradway also took into account that delivery of this value in the form of LTI equity awards (as opposed to an increase in cash compensation) ensures the substantial majority of Mr. Bradway’s compensation is “at risk,” performance-based, and focused on the longer-term.
The March 2018 Compensation Committee review of the market data also resulted in granting Mr. Hooper the same LTI equity award value that he had received in 2017 as this aligned him with the Market Median. For Dr. Harper and Mr. Meline, after reviewing their total target annual cash compensation against the Market Median and noting that both were below the Market Median (see the subsection “Total Target Annual Cash Compensation” below), and to promote internal equity, the Compensation Committee decided to increase Dr. Harper’s and Mr. Meline’s LTI equity award grant values from $3.7 million and $3.5 million, respectively, in 2017, to $4 million in 2018. The
Compensation Committee concluded that these increases in LTI equity award values (as opposed to increases in cash compensation) were appropriate because they address the difference in total target annual cash compensation from the Market Median and target their target total annual direct compensation closer to the Market Median with compensation that is substantially “at risk,” performance-based, and focused on the longer-term. Further, the Compensation Committee also determined to increase Mr. Graham’s LTI equity award value from $2.5 million in 2017 to $2.8 million in 2018 to reflect the breadth and duration of Mr. Graham’s experience in the role of General Counsel at large public companies.
Initial Hire and Promotion Equity Awards
To induce Mr. Gordon to join us and to provide long-term incentives that are in alignment with stockholder interests, a performance unit award valued at $3.5 million was granted with substantially the same terms and conditions as the existing performance award goal design described above for the 2018-2020 performance period except for modifications to address Mr. Gordon’s September 2018 start date. The performance period for Mr. Gordon’s performance unit award began on Mr. Gordon’s equity award grant date (November 2, 2018—the third business day after third quarter 2018 earnings) for purposes of calculating relative TSR and excluded the 2018 operating measures given Mr. Gordon’s late 2018 start date. We also agreed to provide Mr. Gordon with RSUs valued at $6.4 million to compensate Mr. Gordon for equity forfeited as a result of leaving his previous employer, to induce him to join the Company, and to provide long-term incentives that tie a significant portion of Mr. Gordon’s compensation to the value
ï 2019 Proxy Statement 49
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of our stock in alignment with our stockholders’ interests. These RSUs were also granted on November 2, 2018, and, to better align with the value of the equity forfeited, will vest over three years beginning on the first anniversary of the equity award grant date through the third anniversary (at a rate of 35%, 35%, and 30% each year), contingent upon Mr. Gordon being actively employed at the time of each vesting date.
In connection with Dr. Reese’s promotion to Executive Vice President, Research and Development, in July 2018, the Compensation Committee granted Dr. Reese a promotion RSU award with a cash value of $2.4 million. This grant was intended to bring Dr. Reese’s annual grant morein-line with Market Median for his new position. These RSUs were granted on November 2, 2018, and will vest over four years in two equal tranches of 33% on the second and third anniversary of the grant date with the remaining 34% vesting on the fourth anniversary of the grant date. To promote his retention and given that Dr. Reese has satisfied the age and service requirements for retirement eligibility, the terms of our RSU equity award agreement providing for continued vesting after retirement were eliminated from this grant. Thus, in the event of Dr. Reese’s retirement prior to vesting, these promotional RSUs will be forfeited.
Performance Award Program—Performance Units Earned for the 2016-2018 Performance Period
Performance units for the 2016-2018 performance period, which ended December 31, 2018, were earned, certified, and converted into shares of Common Stock in March 2019. Thenon-GAAP operating measures(1) of EPS growth, operating margin, and operating expense were chosen to drive performance in alignment with, and focus our executives on, our 2014-2018 investor commitments discussed earlier. At the end of the performance period, the earned percentages from our performance for the three years under eachnon-GAAP operating measure were averaged and the resulting earned operating measure percentages for each of the three measures were averaged, resulting in a total operating measures score of 115.4%. This score was then modified based on our strong three-year TSR performance ranking (65.2%) relative to the TSRs of the companies in the S&P 500 for this performance period, resulting in a TSR modifier of +30.3% and a payout of 145.7% of target performance units granted. The calculation methodology for the 2016-2018 performance period design is depicted on the following page.
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50 ï 2019 Proxy Statement
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2016-2018 Performance Period Goal Design and Award Calculation
All operating measures were established in early 2016 at the
beginning of the three-year performance period
2018 Operating Measures and Performance
| Non-GAAP(1) Operating Measures | Minimum (50%) | Target (100%) | Intermediate (125%) | Maximum (150%) | 2018 Performance | |||||||||||||||||||||||
| EPS Growth ($) | 142.9% ($14.37) | ||||||||||||||||||||||||||
£$11.15 | $12.25 | $13.80 | ³$14.60 | |||||||||||||||||||||||||
Operating Margin (%) | 106.6% (52.5%) | |||||||||||||||||||||||||||
£48% | 52% | 54% | ³58% | |||||||||||||||||||||||||
Operating Expense (in billions) | 50.0% ($11.91B) | |||||||||||||||||||||||||||
³$11.5B | $10.9B | – | £$10.3B | |||||||||||||||||||||||||
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99.8%
| |||||||||||||||||||||||||||
2016-2018 Operating Measures Score (Operating Measure Percentages 50 – 150% with linear | ||||||||
| Operating Measures Percentages are Equally Weighted for Each of the Three Years | ||||||||
| Non-GAAP(1) Operating Measures | 2016(2) | 2017(2) | 2018 | 2016-2018 Average Operating Measures | ||||
EPS Growth ($) | 137.0% ($11.65) | 128.8% ($12.74) | 142.9% ($14.37) | 136.2% | ||||
Operating Margin (%) | 128.6% (52.3%) | 134.7% (54.2%) | 106.6% (52.5%) | 123.3% | ||||
Operating Expense (in billions) | 94.4% ($11.54) | 115.6% ($11.04) | 50.0% ($11.91) | 86.7% | ||||
120.0%
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126.4%
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99.8%
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115.4%
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 |
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Final 2016-2018 Performance Period Calculation 2016-2018 Non-GAAP(1) Operating Measures EPS Growth (1/3rd) Operating Margin (1/3rd) Operating Expense (1/3rd) 115.4% 2016-2018 Amgen Relative TSR Performance 30.3% Final Payout 145.7%
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ï 20192020 Proxy Statement 51
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Compensation Discussion and Analysis
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Performance Units Earned for 2016-2018 Performance PeriodValue of 2019 Annual Long-Term Incentive Equity Awards
Our actualBased on a review of Company and executive performance of 145.7% forand market data, the 2016-2018 performance period resulted inCompensation Committee determined to grant the following number of shares of Common Stock being earned underannual LTI equity award grant values to our performance award program for this performance period. Each earned performance unit converted to one share of Common Stock uponCEO and the payoutother NEOs in March 2019, with an effective grant date of March 22, 2019.May 3, 2019, the third business day after the announcement of our first quarter 2019 earnings results. (For more information regarding the determination of the Market Median, see “How Compensation Decisions Are Made For Our Named Executive Officers—Peer Group Data Sources” previously discussed.)
| Named Executive Officer | Performance Units Value Granted (Target) ($) | Number of Performance Units Granted (#) | Number of Shares of our Common (#) | Performance Units(1) ($) | Stock Options ($) | Restricted Stock Units ($) | Total Equity Value Granted ($) | 2018 Market Median ($) | Difference vs. Market Median Over/ (Under) (%) | |||||||||||||||||||||||||||
Robert A. Bradway | 5,500,000 | 32,246 | 50,962 | 7,000,000 | 4,200,000 | 2,800,000 | 14,000,000 | 11,209,000 | 24.9 | |||||||||||||||||||||||||||
Anthony C. Hooper | 2,000,000 | 11,726 | 18,532 | |||||||||||||||||||||||||||||||||
Murdo Gordon(2) | n/a | n/a | n/a | |||||||||||||||||||||||||||||||||
Sean E. Harper | 1,750,000 | 10,260 | 16,215 | |||||||||||||||||||||||||||||||||
Murdo Gordon | 2,000,000 | 1,200,000 | 800,000 | 4,000,000 | 3,918,612 | 2.1 | ||||||||||||||||||||||||||||||
David W. Meline | 1,750,000 | 10,260 | 16,215 | 2,000,000 | 1,200,000 | 800,000 | 4,000,000 | 3,399,988 | 17.6 | |||||||||||||||||||||||||||
David M. Reese | 400,000 | 2,345 | 3,706 | 2,000,000 | 1,200,000 | 800,000 | 4,000,000 | 4,010,465 | (0.3) | |||||||||||||||||||||||||||
| Jonathan P. Graham | 1,150,000 | 6,742 | 10,655 | |||||||||||||||||||||||||||||||||
Jonathan P. Graham(2)
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| 1,400,000
|
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| 840,000
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| 560,000
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| 2,800,000
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| 2,594,725
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| 7.9
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| ||||||||||||||||||
| (1) |
|
| (2) | Mr. |
Outstanding Performance Units—2017–2019 Performance Period
Based on the March 2019 Compensation Committee review and deliberation in December 2016 and March 2017,of the market data, the Compensation Committee constructed the 2017-2019approved an increase in Mr. Bradway’s LTI equity award from $12.5 million to $14 million to reward Mr. Bradway for strong performance period (January 1, 2017 to December 31, 2019) design to be similar to thatand excellent leadership of the 2016-2018 performance period design. ForCompany since 2012, noting that, since 2012 Mr. Bradway’s base salary and/or total target annual cash compensation had been below the firstMarket Median, and second years of the 2017-2019 performance period,to differentiate his pay with equity that is substantially performance-based. In making its decision, the Compensation Committee retainednoted that, while the threenon-GAAP operating measuresMarket Median for CEO pay had declined as a result of EPS growth, operating margin, and operating expense used forturnover in leadership at four of our peer group companies, among continuing incumbents at our peer group companies, the 2016-2018 performance period as they continued to drive performance in alignment with, and focus our executives on, our 2014-2018 investor commitments discussed earlier.
For the third yearMarket Median increased. The March 2019 Compensation Committee review of the 2017-2019 performance period (2019),market data also resulted in granting Mr. Meline the same LTI equity award value ($4 million) that he had received in 2018 in recognition of Mr. Meline’s lengthy tenure in the role of Chief Financial Officer of large public companies and the value of his expertise. The Compensation Committee also granted Mr. Gordon and Dr. Reese LTI equity award grant values of $4 million each to position their respective total target direct compensation closer to the Market Median for their respective roles. Further, in continued recognition of Mr. Graham’s tenure and diversity of experience in the
role of General Counsel at other complex publicly traded companies, the Compensation Committee replacednon-GAAP operating expensegranted Mr. Graham the same LTI equity award value ($2.8 million) that he had received in 2018. The Compensation Committee concluded that the LTI equity award values granted were appropriate because they recognize and reward strong execution by our executives with compensation that is substantially “at risk,” performance-based, and focused on the longer-term.
non-GAAPPromotion Equity Awards ROIC in response
Mr. Graham was promoted to stockholder feedback, as well asExecutive Vice President, General Counsel and Secretary effective October 22, 2019 to support our 2014-2018 investor commitmentsrecognize the scope and our goalimpact of delivering an efficient, disciplined business model beyond 2018.
To create greater alignmenthis service to the Company. In connection with our stockholders’ interests,Mr. Graham’s promotion, the Compensation Committee also retainedgranted Mr. Graham a promotional RSU award on November 1, 2019 with a value of $2 million. This grant was intended to bring Mr. Graham’s 2019 annual LTI equity award grant morein-line with his role as Executive Vice President and will vest in accordance with our standard vesting schedule over four years, with no vesting in the requirement that the TSR modifier could not effect a payout greater than target if our absolute TSR over the performance period was less than 0.
The calculation methodology for the 2017-2019 performance period design is substantially similar to that depicted above for the 2016-2018 performance units. The performance metricsfirst year and their weightings, as well as our actual performance for the completed annual operating measurement periods of 2017 and 2018 are set forth on the following page.three approximately equal installments each year thereafter.
52 ï 20192020 Proxy Statement
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Compensation Discussion and Analysis
|
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Performance Award Program 2017-2019 Performance Period Goal Design and Award CalculationPerformance Units Earned
At the end of the 2017-2019 performance period, our performance for each of the three annualAllnon-GAAP operating measures was averaged, resulting in 137.8% earned for EPS growth, 98.8% earned for operating margin, and 74.5% earned for operating expense and ROIC over the three-year period. These threenon-GAAP operating measure percentages were established in early 2017 at the
beginningthen averaged for a total operating measures score of 103.7% for the three-year performance period. Based on our strong TSR ranking of 77.8th percentile relative to the TSRs of the companies in the S&P 500, the total operating measures score of 103.7% was increased by the maximum TSR adjustment of 50 percentage points to 153.7%. This actual earned performance of 153.7% for the 2017-2019 performance period
2018 Operating Measures and Performance resulted in the following number of shares of Common Stock being earned. Each earned performance unit converted to one share of Common Stock upon the payout date of March 20, 2020. See the detailed description of the 2017-2019 performance period previously discussed.
| Non-GAAP(1) Operating Measures | Minimum (50%) | Target (100%) | Intermediate (125%) | Maximum (150%) | 2018 Performance | |||||||||||||||||||||||
| EPS Growth ($) | 142.9% ($14.37) | ||||||||||||||||||||||||||
£$11.15 | $12.25 | $13.80 | ³$14.60 | |||||||||||||||||||||||||
Operating Margin (%) | 106.6% (52.5%) | |||||||||||||||||||||||||||
£48% | 52% | 54% | ³58% | |||||||||||||||||||||||||
Operating Expense (in billions) | 50.0% ($11.91B) | |||||||||||||||||||||||||||
³$11.5B | $10.9B | – | £$10.3B | |||||||||||||||||||||||||
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99.8% | |||||||||||||||||||||||||||
2017-2019 Operating Measures Score (Operating Measure Percentages 50 – 150% with linear | ||||||||||
Operating Measures Percentages are Equally Weighted for Each of the Three Years | ||||||||||
| Non-GAAP(1) Operating Measures | 2017(2) | 2018 | 2019 | 2017-2019 Average Operating Measures | ||||||
EPS Growth ($) |
1/3rd | 133.8% ($12.74) | 142.9% ($14.37) |
Pre-established and to be disclosed(3) | TBD | |||||
Operating Margin (%) |
1/3rd | 114.5% (54.2%) | 106.6% (52.5%) | TBD | ||||||
Operating Expense Years 1 & 2 (in billions) |
1/3rd | 107.0% ($11.04) | 50.0% ($11.91) | Not Applicable for 2019 | TBD | |||||
ROIC Year 3 | Not Applicable for 2017 and 2018 |
Pre-established and to be disclosed(3) | ||||||||
118.4%
|
99.8%
|
TBD
|
TBD
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|
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2018 Targets(2)
Final 2017-2019 Performance Period Calculation 2017-2019 Non-GAAP(1) Operating Measures EPS Growth (1/3rd) Operating Margin (1/3rd) Operating Expense ROIC (1/3rd) 2017-2019 Amgen Relative TSR Performance Final Payout Multiplier (0-200% of target)
| Named Executive Officer | Performance Units Value Granted (Target) ($) | Number of Performance Units Granted (#) | Number of Shares of our Common (#) | |||||||||
Robert A. Bradway | 6,000,000 | 33,543 | 56,106 | |||||||||
Murdo Gordon(2) | n/a | n/a | n/a | |||||||||
David W. Meline | 1,750,000 | 9,783 | 16,363 | |||||||||
David M. Reese | 400,000 | 2,236 | 3,740 | |||||||||
Jonathan P. Graham
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| 1,250,000
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| 6,988
|
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| 11,688
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| (1) |
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| (2) |
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ï 20192020 Proxy Statement 53
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Performance Award Goal Design for the 2018–2020 Performance Period
As discussed previously, the Compensation Committee evaluated potential performance award goal designs for the 2018-2020 performance period at its December 2017 and March 2018 meetings, with input from management and FW Cook. The Compensation Committee constructed the 2018-2020 performance period (January 1, 2018 to December 31, 2020) goal design to be similar to that of the 2017-2019 performance period goal design with 2018 annual operating measures remaining the same, while retaining EPS growth and adding ROIC as the other operating measure for 2019 and 2020 of
the 2018-2020 performance period. These two performance measures are also included among the threenon-GAAP operating measures used for 2019 of the 2017-2019 performance period. The TSR modifier was rebalanced for the 2018-2020 performance period from 50 to 30 percentage points. The Compensation Committee retained the requirement that the TSR modifier could not effect a payout greater than target if our absolute TSR over the performance period was less than 0. See “Long-Term Incentive Equity Award Design Changes in 2018” for a full description of the rationale for the performance award goal design for the 2018-2020 performance period. The calculation for the 2018-2020 performance period goal design also is depicted on the following page.
54 ï 2019 Proxy Statement
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Compensation Discussion and Analysis
|
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2018-2020 Performance Period Goal Design and Award Calculation
All operating measures and goals were established in early 2018 at the
beginning of the three-year performance period
Based on review and deliberation in December 2017 and March 2018, the Compensation Committee with input from management and FW Cook constructed the 2018-2020 performance period (January 1, 2018 to December 31, 2020) design to be similar to that of the 2017-2019 performance period design. All operating measures and goals were established at the beginning of the 2018-2020 performance period. For 2018, the three annualnon-GAAP operating measures established for 2018 under the 2017-2019 performance period were employed. For 2019 and 2020,non-GAAP EPS growth and ROIC, two measures included among the three operating measures established for 2019 under the 2017-2019 performance period, are the operating measures under the 2018-2020 performance period. The TSR modifier was rebalanced for the 2018-2020 performance period from 50 to 30 percentage points to shift the weighting of the TSR modifier to be in greater alignment with the value of each of the operating measures. For our 2019 operating performance measures (after weighting), we performed at 110.6%.
2019 Operating Measures and Performance
Non-GAAP(1) Operating Measures | Minimum (30%) | Low (65%) | Target (100%) | High (135%) | Maximum (170%) | 2018 Performance | ||||||||||||||||||||||||||||
| EPS Growth ($) | 132.7% ($14.40) | ||||||||||||||||||||||||||||||||
£$10.60 | $11.40
| $12.95 | $14.50 | ³$15.30 | ||||||||||||||||||||||||||||||
Operating Margin (%) | 105.4% (52.6%) | |||||||||||||||||||||||||||||||||
£46% | 48%
| 52% | 56% | ³58% | ||||||||||||||||||||||||||||||
Operating Expense (in billions) | 30.0% ($11.89B) | |||||||||||||||||||||||||||||||||
³$11.8B | –
| $11.2B | – | £$10.6B | ||||||||||||||||||||||||||||||
|
89.4%
| |||||||||||||||||||||||||||||||||
Non-GAAP(1) Operating Measures | Minimum (30%) | Low (65%) | Target (100%) | High (135%) | Maximum (170%) | 2019 Performance | ||||||||||||||||||||||||||||
| EPS Growth ($) | 131.8% ($14.82) | ||||||||||||||||||||||||||||||||
£$9.05 | $10.05
| $12.55 | $15.05 | ³$16.05 | ||||||||||||||||||||||||||||||
ROIC (%) | 89.5% (30.8%) | |||||||||||||||||||||||||||||||||
£26% |
28%
| 32% | 36% | ³38% | ||||||||||||||||||||||||||||||
|
110.6%
| |||||||||||||||||||||||||||||||||
2018-2020 Operating Measures Score (Operating Measure Percentages 30 – 170% with linear | ||||||||
Operating Measures Percentages are Equally Weighted for Each of the Three Years | ||||||||
| Non-GAAP(1) Operating Measures | 2018 | 2019 | 2020 | 2018-2020 Average Operating Measures | ||||
Operating Margin (%) Year 1 | 105.4% (52.6%) | Not Applicable for 2019 | Not Applicable for 2020 | TBD | ||||
Operating Expense Year 1 (in billions) | 30.0% ($11.89) | TBD | ||||||
EPS Growth ($) Years 1, 2, and 3 | 132.7% ($14.40) | Pre-established and to be disclosed(2) | TBD | |||||
ROIC Years 2 and 3 (in billions) | Not Applicable for 2018 | TBD | ||||||
89.4%
|
TBD
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TBD
|
TBD
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2018-2020 Operating Measures Score (Operating Measure Percentages 30 – 170% with linear | ||||||||
Operating Measure Percentages are Equally Weighted for Each of the Three Years | ||||||||
| Non-GAAP(1) Operating Measures | 2018(2) | 2019 | 2020 | 2018-2020 Average Operating Measures | ||||
Operating Margin (%) Year 1 | 105.4% (52.6%) | TBD | ||||||
Operating Expense Year 1 (in billions) | 30.0% ($11.89) | TBD | ||||||
EPS Growth ($) Years 1, 2, and 3 | 132.7% ($14.40) | 131.8% ($14.82) | Pre-established and to be disclosed(3) | TBD | ||||
ROIC (%) Years 2 and 3 | 89.5% (30.8%) | TBD | ||||||
89.4%
|
110.6%
|
TBD
|
TBD
| |||||
2018-2020 S&P 500 Relative TSR(4) Modifier
|
| Payout for Performance Relative to S&P 500 TSR Percentage |
Amgen TSR³75th percentile = 30% (Maximum)
|
Amgen TSR = 50th percentile
|
Amgen TSR£25th percentile = -30% (Minimum)
|
| If Amgen’s TSR is less than 0, the relative TSR modifier can be no greater than 0% (target). |
Final 2018-2020 Performance Period Calculation 2018-2020 Non-GAAP(1) Operating Measures 2018 2019/2020 EPS Growth EPS Growth Operating Margin ROIC Operating Expense 2018-2020 Relative TSR Performance Final Payout Multiplier (0-200%) of target)
| (1) | The 2018non-GAAP operating measures (EPS growth, operating margin, and operating expense) and the 2019non-GAAP operating measures (EPS growth and ROIC) with respect to the 2018-2020 performance period are as reported and reconciled inAppendix B. |
| (2) | Our targets for our 2018 performance were disclosed under the 2018-2020 performance goals in our 2019 proxy statement filed with the Securities and Exchange Commission on April 8, 2019. |
| (3) | 2020 targets arepre-established, but are not being disclosed at this time as they are competitively sensitive. |
| (4) | TSR Measurement Points = Average daily closing price of stock for the first 20 trading days beginning on the grant date and the last 20 trading days of the performance period. |
54 ï 2020 Proxy Statement
| ||||||||||
Compensation Discussion and Analysis |
2019-2021 Performance Period Goal Design and Award Calculation
All operating measures and goals were established at the
beginning of the three-year performance period
The Compensation Committee constructed the 2019-2021 performance period (January 1, 2019 to December 31, 2021) design with twonon-GAAP operating measures of EPS growth and ROIC weighted equally in each year(one-half per measure). See the detailed description of the 2019-2021 performance period previously discussed.
2019 Operating Measures and Performance
Non-GAAP(1) Operating Measures | Minimum (30%) | Low (90%) | Target (100%) | High (110%) | Maximum (170%) | 2019 Performance | ||||||||||||||||||||||||||||
| EPS Growth ($) | 108.8% ($14.82) | ||||||||||||||||||||||||||||||||
£$10.00 | $12.00
| $13.45 | $15.00 | ³$17.00 | ||||||||||||||||||||||||||||||
ROIC (%) | 92.2% (30.8%) | |||||||||||||||||||||||||||||||||
£25% | 29%
| 37% | 45% | ³49% | ||||||||||||||||||||||||||||||
|
100.5%
| |||||||||||||||||||||||||||||||||
2019-2021 Operating Measures Score (Operating Measure Percentages 30 – 170% with linear
| ||||||||
Operating Measure Percentages are Equally Weighted for Each of the Three Years
| ||||||||
| Non-GAAP(1) Operating Measures
| 2019
| 2020
| 2021
|
2019-2021
| ||||
EPS Growth ($) |
108.8% ($14.82) | Pre-established and to be disclosed(2) | TBD | |||||
ROIC(%) | 92.2% (30.8%) | TBD | ||||||
100.5%
|
TBD
|
TBD
|
TBD
| |||||
2019-2021 S&P 500 Relative TSR(3) Modifier |
Payout for Performance Relative to S&P 500 TSR Percentage |
Amgen TSR³75th percentile = 30% (Maximum) |
Amgen TSR = 50th percentile |
Amgen TSR£25th percentile = -30% (Minimum) |
| If Amgen’s TSR is less than 0, the relative TSR modifier can be no greater than 0% (target) |
Final 2018-20202019-2021 Performance Period Calculation 2018-20202019-2021 Non-GAAP(1) Operating Measures 2018 2019 and 2020 EPS Growth EPS Growth Operating Margin ROIC Operating Expense 2018-20202019-2021 Amgen Relative TSR Performance Final Payout Multiplier (0-200% of target)
| (1) | The |
| (2) |
|
| (3) | TSR Measurement Points = Average daily closing price of stock for the first 20 trading days beginning on the grant date and the last 20 trading days of the performance period. |
ï 20192020 Proxy Statement 55
|
Compensation Discussion and Analysis
|
|
Performance Award Goal Design for the 2019–20212020–2022 Performance Period
As part of its regular review and consideration of the performance award program, the Compensation Committee evaluated potential performance award goal designs for the 2019-20212020-2022 performance period (January 1, 20192020 to December 31, 2021)2022) with input from management and FW Cook at its December 20182019 and March 20192020 meetings. Based on such evaluations, the Compensation Committee designed the goals forretained the 2019-2021 performance period to be similar to that ofgoals for the 2018-20202020-2022 performance period goal design, retaining theperiod. The operating measures ofnon-GAAP EPS and ROIC used for the last two years of the 2018-2020 performance period for the entire 2019-2021 performance period to reflect our continued focus on remaining operationally disciplined in our management of the business and use of capital. The operating measures ofnon-GAAP EPS growth and ROIC areremain weighted equally in each year(one-half per measure) and are measured against targets and goalspre-established for each year of the performance period at the beginning of this three yearthe performance period. The Compensation Committee selectednon-GAAP EPS to measure delivery of value to stockholders, including, among other things, the effectiveness of our execution of our strategic priority of “Capital Allocation and Investing for Long Term Growth” over an appropriate period. The Compensation Committee also retained the requirement that the TSR modifier could not effect a payout greater than target if our absolute TSR over the performance period was less than 0. The Compensation Committee revised the calculation ofnon-GAAP ROIC for the 2020-2022 performance period to include cash in invested capital.
Dividend Equivalents
RSUs and performance units have dividend equivalent rights. Such dividend equivalents are payable only when, and to the extent, the underlying RSUs and performance units are vested, earned, and converted to shares of Common Stock. The dividend equivalents may be paid in stock (with cash paid for fractional shares) or in cash at the Compensation Committee’s election. Stock options do not have dividend equivalent rights.
Plan Minimum Vesting Period of One Year; Actual Minimum of Two Years
Mindful of stockholder concerns and best practices, our equity incentive plan requires that at least 95% of all equity awards, including RSUs, restricted stock, stock options, performance awards, and
dividend equivalents granted to staff members (including NEOs) will be subject to a minimum vesting period of no less than one year. Our annual stock option and RSU grants generally vest over four years in three approximately equal annual installments on the second, third, and fourth anniversaries of the grant date. This delayed vesting schedule further underscores the long-term focus of our LTI equity award program and enhances retention of staff members.
Long-Term Incentive Equity Awards Granted to Named Executive Officers in 20192020
In March 2019,2020, the Compensation Committee reviewed the LTI equity award grant values proposed to be granted to NEOs in 2019.2020. The Compensation Committee approved an increase in Mr. Bradway’s LTI equity award from $12.5 million to $14 million to reward Mr. Bradway for strong performance$14.4 million to recognize his
sustained and excellentsuccessful leadership of the Company since 2012. In making its decision,through a period of transformation to meet the challenges of the evolving biopharmaceutical marketplace. The Compensation Committee noted that, whileapproved an increase in the LTI equity award from $4 million to $4.1 million for Dr. Reese to bring Dr. Reese’s total direct compensation closer to the Market Median and to reflect the importance of his contributions to the Company since his promotion to Executive Vice President. The Compensation Committee also approved an increase in the LTI equity award from $4 million to $4.1 million for CEO pay had declined because of turnover inMr. Gordon to recognize his leadership at four of our peer group companies, among continuing incumbents the Market Median increased.Commercial team through a period of transition and his positioning of our Commercial team for a period of growth. The Compensation Committee granted Messrs. Gordon and Meline and Dr. Reese eachMr. Graham an LTI equity award grant value of $4$3.9 million to position their respective total target direct compensation closer to the Market Median for their respective roles. The Compensation Committee did not granthis 2020 annual LTI equity awards for 2019 to Dr. Harper or Mr. Hooperaward grantin-line with his role as Dr. Harper left the Company in January 2019 and Mr. Hooper retired from the role of Executive Vice President Global Commercial Operationsand to reflect the value to Amgen stockholders of the work in 2018 (although hewhich his team is engaged. As Mr. Meline remains with the Company to assist in the transition to Mr. Gordon as well as to lead and execute on several corporate strategic objectives). In continued recognition of Mr. Graham’s tenure and diversity of experience in the role of General Counsel at large public companies, the Compensation Committeeour new Chief Financial Officer, he was granted Mr. Graham the samean LTI equity award grant value ($2.8 million) thatequal to the same value as he had received in 2018.2019 ($4 million) which will bepro-rated according to the number of complete months of employment in 2020. The Compensation Committee concluded that the LTI equity award values granted were appropriate because they recognize and reward strong execution by our executives with compensation that is substantially “at risk,” performance-based, and focused on the longer-term.
Annual Cash Incentive Awards
Executive Incentive Plan
Annual cash incentive awards to our NEOs are generally made under our stockholder-approved Executive Incentive Plan, or EIP, which employs a formula that establishes a maximum award possible for each participant based on ournon-GAAP net income(1). For 2019, each of our NEOs was a participant in the EIP. This year, as in the past, actual awards under the EIP are determined by the Compensation Committee using its negative discretion under the EIP, with award determinations based on Company performance against the composite final score of thepre-established 2019 Company performance goals. In evaluating and confirming this approach, the Compensation Committee also considers the contributions of each participant’s role to our success during the year.
In March 2019, the Compensation Committee determined for the EIP participants, the definition ofnon-GAAP net income(1), the maximum award payable for each participant, the target annual cash incentive award opportunities. In addition, the Compensation Committee determined the plan design for the Global Management Incentive Plan, or GMIP, and Global Performance Incentive Plan, or GPIP, and the 2019 Company performance goals and weightings, and the percentages payable for threshold, target, and maximum performance.
Target Annual Cash Incentive Award Opportunity
After review of market data, the Compensation Committee determined that the target annual cash incentive award opportunities for our NEOs
| (1) | Non-GAAP net income for purposes of the EIP is as reported and reconciled inAppendix B. |
56 ï 20192020 Proxy Statement
|
Compensation Discussion and Analysis
|
|
Annual Cash Incentive Awards
Executive Incentive Plan
Annual cash incentive awards to our NEOs are generally made under our stockholder-approved EIP, which employs a formula that establishes a maximum award possible for each participant based on ournon-GAAP net income(1). This year, and in the past, actual awards under the EIP are determined by the Compensation Committee using its negative discretion under the EIP, based on the composite final score of thepre-established 2018 Company performance goals. In evaluating and confirming this approach, the Compensation Committee also considers the contributions of each participant’s role to our success during the year. For 2018, each of our NEOs was a participant in the EIP, with the exception of Mr. Gordon, whose award was made under our Global Management Incentive Plan, or GMIP, since he commenced employment in September 2018 and, as such, was not eligible to participate in the EIP.
In March 2018, the Compensation Committee determined for the EIP participants, the definition ofnon-GAAP net income(1), the maximum award payable for each participant, the target annual cash incentive award opportunities and, for the EIP, GMIP, and Global Performance Incentive Plan, or GPIP, the 2018 Company performance goals and the weightings and percentages payable for threshold, target, and maximum performance.
Target Annual Cash Incentive Award Opportunity
After review of market data, the Compensation Committee determined that Mr. Bradway’s target annual cash incentive award opportunity would remain 150%the same as 2018 (150% of base salary in 2018for Mr. Bradway and the target annual cash incentive award opportunity100% for each of the returning Executive Vice President NEOs would also remain the same in 2018 as it was for 2017 (100% of base salary)NEOs). ConsistentIn connection with the target annual cash incentive award opportunity previously established for the otherMr. Graham’s promotion to Executive Vice Presidents,President, General Counsel and Secretary effective October 22, 2019, Mr. Gordon’s target annual cash incentive award opportunity (under the GMIP) was set at 100% of base salary as part of his September 2018 offer letter based on the Market Median for his position and for internal consistency. Dr. Reese’sGraham’s target annual cash incentive award opportunity was increased from 65% to 100% of base salary in connectionalignment with his promotion toother Executive Vice President ResearchNEOs to 100%, and Development,his 2019 target opportunity waspro-rated based on the Market Median fornumber of days before and after the effective date of his position and for internal consistency. Mr. Graham’s target annual cash incentive award opportunity as a Senior Vice President was increased from 80% of base salary to 90% of base salary to align with that of the Market Median for his role.promotion.
The maximum award under the EIP continued to be expressed as the EIPnon-GAAP net income(1) definition and, consistent with past years, was 0.125% for our CEO, 0.075% for each of the Executive Vice President NEOs, and 0.05% for the Senior Vice President NEO.Mr. Graham. As discussed previously, both historically and in 2018,2019, the Compensation Committee has paid well below the maximum award permitted under
the EIP based on a practice of exercising negative discretion from the calculated EIP maximum award payable to each participant by using the Company performance goals composite final score under our GMIP as applied to the participant’s target annual cash incentive award opportunity to determine actual awards.
20182019 Company Performance Goals
The 2018 Company performance goals under our GMIP approved by the Compensation Committee were:
“Deliver Results” goals (60%):
|
“Progress Innovative Pipeline” goals (25%):
|
“Deliver Annual Priorities” goals (15%):
|
|
While all of the goals measure single-year performance, taken as a whole, they are intended to positively position us for both near- and longer-term
long-term success, support our strategic priorities, and create stockholder value. There are no payouts for below-threshold performance on any of ourThe 2019 Company performance goals. Threshold performance on our “Progress Innovative Pipeline” goals results in 50% earned for those metrics. Certain measurements of performance for thenon-financial metrics are more subjective in nature and could result in a very small payout percentage (less than 1% of an annual cash incentive award). Maximum performance under each metric results in earning 225% of target annual cash incentive award opportunity for that metric. Thus, maximum performance under all metrics would result in 225% of target annual cash incentive award opportunity being earned. Annual cash incentive awards are paid in March of the year following the annual performance period and certification of the resulting payoutsapproved by the Compensation Committee.Committee were based on our 2019 budget and forecast at the time of such approval and are discussed on the following page.
For the 2019 Company performance goals, management recommended, and the Compensation Committee concurred with, (i) an increase in the weighting for “Advance Early Pipeline” (from 5% to 10%) to focus on progressing programs in development, with a concurrent decreased weighting for “Execute Critical Launches and Long-Term Commercial Objectives” (from 10% to 5%); and (ii) replacing “Achieve Transformation Objectives” with “Achieve Productivity Objectives” to reflect the Company’s movement beyond its 2014-2018 investor commitments and its focus on productivity to support continued reinvestment in opportunities (such as the early pipeline) while striving to maintain appropriate expense discipline. The goals also reflected the wide range of revenue uncertainty for 2019 given patent expiries, with targets consistent with the budget and forecast at the time of such goal setting, and both the 2019 financial andnon-financial goals continuing to increase the level of execution necessary to deliver the required performance.
| (1) | Non-GAAP net income for purposes of the EIP is as reported and reconciled inAppendix B. |
|
ï 20192020 Proxy Statement 57
|
Compensation Discussion and Analysis
|
|
20182019 Company Performance Goals and Results
The table below illustrates the goals established, the weighting of each goal, and our actual performance for 2018. No amounts2019. Payouts can be earnedrange from 0% to a maximum of 225% of target annual cash incentive award opportunity for below-thresholdeach metric and the final company performance goals score cannot exceed 225%. For additional discussion regarding our performance, please see “Aligning Pay With Performance and Execution of Our Strategic Priorities.”
Deliver Results (60% weighting) |
|
|
Weighted Score Achieved 103.7% |
| ||||||||||||||||
($ In Millions)
Equally focused ontop- and bottom-line growth and assigned the largest percentage, consistent with the fundamental importance of financial performance to us and our stockholders in both the near- and long-term. No amounts can be earned for below-threshold performance for our financial metrics.
|
| |||||||||||||||||||
Goals |
| Weighting |
|
| Threshold |
|
| Target |
|
| Maximum |
|
| Achieved |
| |||||
Revenues |
|
30% |
|
|
$20,453 |
|
$ |
22,100 |
|
|
$23,747 |
|
|
$23,362 177.3% |
| |||||
Non-GAAP Net Income(1) | 30% | $7,084 | $8,213 | $9,342 | | $9,028 168.3% |
| |||||||||||||
Certain measurements of performance for our financial metrics.thenon-financial metrics are subjective in nature and could result in a very small payout percentage (less than 1% of an annual cash incentive award).
Deliver Results (60% weighting) |
|
|
Weighted Score Achieved 123.4% |
| ||||||||||||||||
Financial Goals (60%) ($ In Millions) |
| Weighting |
|
| Threshold |
|
| Target |
|
| Maximum |
|
| Achieved |
| |||||
Revenues |
|
30% |
|
|
$20,580 |
|
$ |
21,990 |
|
|
$23,750 |
|
|
$23,747 224.7% |
| |||||
Non-GAAP Net Income(1) | 30% | $7,815 | $8,685 | $9,725 | | $9,573 186.5% |
| |||||||||||||
Progress Innovative Pipeline (25% weighting) |
Weighted Score Achieved 29.9% | |||||||||
Goals | Weighting | Results | Achieved | |||||||
Advance Early Pipeline |
|
5% |
|
• We generated a total of eight product teams (formed when a molecule has been judged to have the potential to be safe and effective in humans). |
|
113.9% |
| |||
• We advanced two programs through theearly-to-late stage portal. | ||||||||||
• We initiated 10first-in-human studies, including for small-cell lung cancer, obesity, glioblastoma, relapsed/refractory diffuse largeb-cell lymphoma, mantle cell lymphoma and follicular lymphoma, multiple myeloma, acute myeloid leukemia,non-hodgkins lymphoma, and cardiovascular disease. | ||||||||||
• We established access to a new large population for genetic analysis and initiated genotyping and sequencing. | ||||||||||
Execute Key Clinical Studies and Regulatory Filings | 20% | • We achieved selected clinical activity milestones for KYPROLIS, BLINCYTO, Nplate, IMLYGIC, and ABP 710 (biosimilar infliximab (REMICADE®)). | 120.8% | |||||||
• We completed regulatory filings for Aimovig, XGEVA (skeletal related events in multiple myeloma), Repatha, BLINCYTO, EVENITY (U.S. submission), and KYPROLIS. | ||||||||||
Deliver Annual Priorities (15% weighting) |
Weighted Score Achieved 13.3% | |||||||||
Goals | Weighting | Results | Achieved | |||||||
Execute Critical Launches and Long-Term Commercial Objectives |
|
10% |
|
• We set aspirational internal goals to focus our entire Company on delivering on the promise of three important medicines, Prolia, KYPROLIS, and Repatha. While all three products delivered double-digit, volume-driven growth, we did not meet all of our aspirational goals. |
|
71.3% |
| |||
Achieve Transformation Objectives | 5% | • We established six transformation initiatives with specific savings targets established for each activity across corporate functions and operations to drive additional savings across the Company, advance internal productivity, and further our full potential initiatives. For this program, we realized approximately $368 million in gross savings that we reinvested in the business including product launches and research and development activities(2).
| 124.2% | |||||||
Progress Innovative Pipeline (30% weighting) | Weighted Score Achieved 26.0% | |||||||||
Measures progress on both early- and later-stage product candidates to focus us on executing key clinical studies and delivering a robust product pipeline at all stages of the development continuum, which we believe is critical to our continued success over both the near- and long-term.
|
| |||||||||
Goals | Weighting | Results | Achieved | |||||||
Advance Early Pipeline |
|
10% |
|
• We generated a total of eight product teams (formed when a molecule has been judged to have the potential to be safe and effective in humans). |
|
100.0% |
| |||
• We initiated sevenfirst-in-human studies, including with product candidates for prostate and other solid tumor cancers, multiple myeloma, cardiovascular disease, and respiratory diseases. | ||||||||||
• We advanced four programs through theearly-to-late stage portal (the period entering Phase 2 through Phase 3). | ||||||||||
Execute Key Clinical Studies and Regulatory Filings | 20% | • We achieved key clinical study milestones for Omecamtiv Mecarbil, KYPROLIS, Nplate, and ABP 798 (biosimilar rituximab (Rituxan®)). | 80.0% | |||||||
• We completed regulatory filings for EVENITY, Prolia, KYPROLIS, AVSOLA (biosimilar infliximab (Remicade®)), and ABP 215 (biosimilar bevacizumab).
| ||||||||||
Deliver Annual Priorities (10% weighting) | Weighted Score Achieved 9.2% | |||||||||
Goals | Weighting | Results | Achieved | |||||||
Execute Critical Launches and Long-Term Commercial Objectives– Focuses on executing on our key product launches. |
|
5% |
|
• We set aspirational internal goals to focus our entire Company on delivering on the promise of three important medicines – Repatha, Prolia, and Aimovig. While all three products delivered significant volume-driven growth, we did not meet our aspirational goals for Repatha and Aimovig. |
|
77.2% |
| |||
Achieve Productivity Objectives – Focuses on productivity to support continued reinvestment in opportunities (such as the early pipeline). | 5% | • We established a target $280 million of gross operating expense savings. We realized approximately $286 million of gross savings that we reinvested in the business. | 106.8% | |||||||
|
|
Achieved
|
|
| (1) | Non-GAAP net income for purposes of the |
|
58 ï 20192020 Proxy Statement
|
Compensation Discussion and Analysis
|
|
20182019 Annual Cash Incentive Awards
As shown in the table above, our performance against the 20182019 Company performance goals yielded a composite final score of 166.6%138.9% and the Compensation Committee awarded actual annual cash incentive awards under the EIP to our NEOs based on this composite final score. No further discretion was employed.
| Named Executive Officer | Target Opportunity (% of Base Salary) | Target 2018 Award($) | Actual 2018 Award($)(1) | Target Opportunity (% of Base Salary) | Target 2019 Award($) | Actual 2019 Award($)(1) | ||||||||||||||||||
Robert A. Bradway |
| 150 |
|
| 2,340,000 |
|
| 3,898,000 |
|
| 150 |
|
| 2,390,769 |
|
| 3,321,000 |
| ||||||
Anthony C. Hooper |
| 100 |
|
| 1,053,000 |
|
| 1,754,000 |
| |||||||||||||||
Murdo Gordon(2) |
| 100 |
|
| 307,692 |
|
| 513,000 |
| |||||||||||||||
Sean E. Harper |
| 100 |
|
| 974,000 |
|
| 1,623,000 | ||||||||||||||||
Murdo Gordon |
| 100 |
|
| 1,021,154 |
|
| 1,418,000 |
| |||||||||||||||
David W. Meline |
| 100 |
|
| 974,000 |
|
| 1,623,000 |
| 100 |
|
| 994,646 |
|
| 1,382,000 |
| |||||||
David M. Reese |
| 80 | (3) |
| 548,154 |
|
| 913,000 |
| 100 |
|
| 970,139 |
|
| 1,348,000 |
| |||||||
Jonathan P. Graham |
| 90 |
|
| 841,500 |
|
| 1,402,000 |
|
| 92 | (2) |
| 878,494 |
|
| 1,220,000 |
| ||||||
| (1) | Calculated in accordance with the |
| (2) | Mr. |
|
Sign-On and Promotional Bonuses
To replace the value of Mr. Gordon’s 2018 bonus with his previous employer which was forfeited upon him leaving his position and to induce Mr. Gordon to accept our offer, we agreed to provide Mr. Gordon with a $2 millionsign-on bonus.
In connection with Dr. Reese’s promotion to Executive Vice President, Research and Development, the Compensation Committee approved a promotional lump sum payment of $300,000 to Dr. Reese.
20192020 Company Performance Goals
In March 2019,2020, the Compensation Committee established Company performance goals for 20192020 performance under our GMIP as follows:
| ||
60% |
Deliver Results | |
• Revenues (30%)
• Non-GAAP Net Income (30%) | ||
30% |
Progress Innovative Pipeline | |
• Execute Key Clinical Studies and Regulatory Filings (20%)
• Advance Early Pipeline (10%) | ||
10% |
Deliver Annual Priorities | |
•
• |
The Compensation Committee increased the weighting for “Advance Early Pipeline” (from 5% in 2018 to 10% in 2019) to focus the
Company on progressing our programs in development. To provide for the shift of focus towards advancing our early pipeline, the Compensation Committee decreased the weighting forreplaced “Execute Critical Launches and Long-Term Commercial Objectives” (from 10% to 5%). The Compensation Committee replaced “Achieve Transformation Objectives” withand “Achieve Productivity Objectives” to reflect our movement beyondwith the 2014-2018 investor commitmentsnew annual priorities of “Fund Innovation Through Productivity” and our focus“Ensure Successful Integrations and Transitions” as goals that create productivity and add an emphasis on productivity to support continued reinvestment in opportunities (such as our early pipeline) while striving to maintain appropriate expense discipline.integration-related priorities given the Company’s 2019 acquisitions and the BeiGene collaboration.
In March 2019,2020, the Compensation Committee reviewed the target incentive award opportunity for each NEO and determined that the existing target incentive award opportunity for each NEO remains appropriate. No changes were made to the target incentive award opportunity for any NEO.
Base Salaries
Generally, in March of each year, the Compensation Committee reviews the peer group data compared with the Market Median, considers our performance, market conditions, retention, and other such other factors deemed relevant, and receives management’s, including our CEO’s, assessment of the performance of each of the other NEOs, and recommendations regarding any base salary adjustments for them. The Compensation Committee uses our CEO’s evaluation of the performance of the NEOs (other than himself), the Compensation Committee’s own evaluation of our CEO’s performance, information with respect to each NEO’s experience and other qualifications, the Market Median for each position and market conditions to determine each NEO’s base salary. No increase in base salary is automatic or guaranteed. For more information on how decisions are made, see “How Compensation Decisions Are Made For Our Named Executive Officers—Peer Group Data Sources” previously described.
In March 2019, the Compensation Committee reviewed the market competitiveness of each NEO’s base salary employed at the time based on Market Median data and such executive officer’s performance, experience and other qualifications, as well as the Company’s overall performance. In alignment with the base salary increases made to staff members generally, the Compensation Committee increased Mr. Bradway’s base salary by 2.6% and each of the other NEOs by 2.5%.
ï 20192020 Proxy Statement 59
|
Compensation Discussion and Analysis
|
|
“How Compensation Decisions Are Made For Our Named Executive Officers—Peer Group Data Sources” previously described.
In March 2018, the Compensation Committee reviewed the market competitiveness of each NEO’s base salary employed at the time based on Market Median data and such executive officer’s performance, experience and other qualifications, as well as the Company’s overall
performance. In light of our decision in 2018 to not provide salary increases to our employees at the executive director and officer levels (except in exceptional circumstances) to be consistent with the market for talent as well as with our continuing exercise of financial discipline, the Compensation Committee decided to provide no base salary increases to our NEOs.
20182019 Base Salary Market Position
The 20182019 base salaries as in effect at the end of 20182019 and the Market Median position as reviewed by the Compensation Committee in March 20182019 are shown in the table below:
| Named Executive Officer | 2017 Base Salary ($) | Increase (%) | 2018 Base Salary ($) | 2017 Market Median ($) | Difference vs. Market Median Over/(Under) (%) | |||||||||||||||
Robert A. Bradway |
| 1,560,000 |
|
| 0 |
|
| 1,560,000 |
|
| 1,513,000 |
|
| 3.1 |
| |||||
Anthony C. Hooper |
| 1,053,000 |
|
| 0 |
|
| 1,053,000 |
|
| 1,030,952 |
|
| 2.1 |
| |||||
Murdo Gordon(1) |
| n/a |
|
| n/a |
|
| n/a |
|
| n/a |
|
| n/a |
| |||||
Sean E. Harper |
| 974,000 |
|
| 0 |
|
| 974,000 |
|
| 1,025,975 |
|
| (5.1 | ) | |||||
David W. Meline |
| 974,000 |
|
| 0 |
|
| 974,000 |
|
| 1,018,030 |
|
| (4.3 | ) | |||||
David M. Reese(2) |
| 500,000 |
|
| 0 |
|
| 500,000 |
|
| n/a |
|
| n/a |
| |||||
Jonathan P. Graham |
| 935,000 |
|
| 0 |
|
| 935,000 |
|
| 931,759 |
|
| 0.3 |
| |||||
|
|
| Named Executive Officer | 2018 Base Salary ($) | Increase (%) | 2019 Base Salary ($) | 2018 Market Median ($) | Difference vs. Market Median Over/(Under) (%) | |||||||||||||||
Robert A. Bradway |
| 1,560,000 |
|
| 2.6 |
|
| 1,600,000 |
|
| 1,586,000 |
|
| 0.9 |
| |||||
Murdo Gordon |
| 1,000,000 |
|
| 2.5 |
|
| 1,025,000 |
|
| 1,033,452 |
|
| (0.8 | ) | |||||
David W. Meline |
| 974,000 |
|
| 2.5 |
|
| 998,400 |
|
| 1,033,767 |
|
| (3.4 | ) | |||||
David M. Reese |
| 950,000 |
|
| 2.5 |
|
| 973,800 |
|
| 1,098,716 |
|
| (11.4 | ) | |||||
Jonathan P. Graham |
| 935,000 |
|
| 2.5 |
|
| 958,500 |
|
| 953,708 |
|
| 0.5 |
| |||||
20192020 Base Salary Adjustments
In March 2019,2020, the Compensation Committee reviewed the market competitiveness of each NEO’s base salary based on a review of market data and such executive officer’s performance, experience and other qualifications, as well as the Company’s overall performance. In alignment with the base salary increases made to staff members generally, the Compensation increased Messrs. Bradway, Gordon, Meline, and Graham’s respective base salaries by 2.5%. The Compensation Committee increased Mr. Bradway’sDr. Reese’s base salary by 2.6% and each of4% to bring his base salary closer to the other NEOs remaining as executive officers with the Company (Messrs. Gordon, Meline, and Graham and Dr. Reese) by 2.5%.Market Median for his position.
Total Target Annual Cash Compensation
Total target annual cash is the sum of the NEO’s base salary and target annual cash incentive award. The Compensation Committee believes that reviewing our NEOs’ total target annual cash compensation, in addition to the Market Median for each element of compensation, provides a useful check in making compensation decisions.
In March 2018,2019, the Compensation Committee reviewed total target annual cash compensation for each NEO compared to the market data
and historical total target annual cash compensation figures as depicted below. The Compensation Committee noted such total target annual cash compensation was generally below the Market Median with the exception of Messrs. HooperBradway and Graham,Graham. For Mr. Bradway, who werewas slightly above the Market Median, as the Market Median for both Messrs. Hooper’s andall peers declined as a result of turnover in leadership at four of our peer group companies where new incumbents were paid less than their predecessors, but among continuing incumbents, the Market Median increased. The Market Median for Mr. Graham’s positionsposition had declined in prior years.years causing Mr. Graham’s total target annual cash compensation to be above Market Median. The Compensation Committee took these metrics into account and electeddecided to increase the value of LTI equity awards to Mr. Meline and Dr. HarperBradway for 20182019 to bring theirhis target total annual direct compensation (composed of base salary, target annual cash incentive award, and target LTI equity award) closer to the Market Median of continuing incumbents, in lieu of increasing total target annual cash compensation, resulting in compensation that is more “at risk” and performance-based. For more information regarding the determination of Market Median and the peer group data reviewed, see “How Compensation Decisions Are Made For Our Named Executive Officers—Peer Group Data Sources” previously described.
Total Target Annual Cash Compensation
Total target annual cash compensation reviewed by the Compensation Committee in March 2019 prior to the compensation changes being made are shown in the table below:
| Named Executive Officer | 2019 Amgen Target Total Annual Cash ($) | 2018 Market Median ($) | Difference vs. Market Median Over/(Under) (%) | |||||||||
Robert A. Bradway |
| 4,000,000 |
|
| 3,966,000 |
|
| 0.9 |
| |||
Murdo Gordon |
| 2,050,000 |
|
| 2,083,471 |
|
| (1.6 | ) | |||
David W. Meline |
| 1,996,800 |
|
| 2,026,322 |
|
| (1.5 | ) | |||
David M. Reese |
| 1,947,600 |
|
| 2,221,552 |
|
| (12.3 | ) | |||
Jonathan P. Graham |
| 1,821,150 |
|
| 1,659,523 |
|
| 9.7 |
| |||
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Compensation Discussion and Analysis
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|
Total Target Annual Cash Compensation
Total target annual cash compensation reviewed by the Compensation Committee in March 2018 prior to the compensation changes being made are shown in the table below:
| Named Executive Officer | 2017 Amgen Target Total Annual Cash ($) | 2017 Market Median ($) | Difference vs. Market Median Over/(Under) (%) | |||||||||
Robert A. Bradway |
| 3,900,000 |
|
| 3,959,000 |
|
| (1.5 | ) | |||
Anthony C. Hooper |
| 2,106,000 |
|
| 2,073,699 |
|
| 1.6 |
| |||
Murdo Gordon(1) |
| n/a |
|
| n/a |
|
| n/a |
| |||
Sean E. Harper |
| 1,948,000 |
|
| 2,116,330 |
|
| (8.0 | ) | |||
David W. Meline |
| 1,948,000 |
|
| 2,063,871 |
|
| (5.6 | ) | |||
David M. Reese(2) |
| 825,000 |
|
| n/a |
|
| n/a |
| |||
Jonathan P. Graham |
| 1,776,500 |
|
| 1,690,870 |
|
| 5.1 |
| |||
|
|
Perquisites
Perquisites are limited in both type and monetary value. The Compensation Committee believes, however, that certain perquisites facilitate the efficient operation of our business, allowing our NEOs to better focus their time, attention, and capabilities on our Company, permit them to be accessible to the business as required, alleviate safety and security concerns, and assist us in recruiting and retaining key executives. The perquisites provided to our NEOs generally include an allowance for personal financial planning services, including tax preparation services (not to exceed $15,000 annually in aggregate), annual physical examinations, Company-paid moving and relocation expenses paid on behalf of newly-hirednewly hired and current executives who agree to relocate to work on the Company’s behalf and, in limited instances, personal expenses when on business travel such as guests accompanying NEOs. Certain of our NEOs also have access to a Company car and driver and, subject to the approval of our CEO, the Company aircraft for personal use. Our CEO is encouraged to use our Company aircraft for all of his travel (business and personal) because the Compensation Committee believes that the value to us of making the aircraft available to our CEO, in terms of safety, security, accessibility, and efficiency, is greater than the incremental cost that we incur. No taxgross-up reimbursements are provided to NEOs, except in connection with reimbursement of moving and relocation expenses consistent with our other staff members and our general relocation policy.
We believe that providing taxgross-up reimbursements on the applicable moving and relocation expenses paid on behalf of newly-hirednewly hired and current executives who agree to relocate on the Company’s behalf is appropriate because it treats these executives in a similar manner asnon-executives under our Company-wide policy which is designed to incentivize optimal deployment of our human resources in support of the Company’s strategy. It also assists in the attraction and retention of the executive talent necessary to compete successfully.
We provide limited home sale loss assistance for Senior Vice Presidents and above in connection with relocations that benefit us and are at our request, and in certain new hire situations. We do not provide taxgross-ups for assistance with loss on sale of a home. Our limited home sale loss assistance serves as an important tool in inducing senior management to fully commit to their new role and relocation.
Our Company-wide policy includes a repayment provision applicable to all staff members (including our NEOs) that requires a new staff member hired from outside the Company or staff members who accept an assignment and relocate, to repay us for moving and relocation expenses and home loss assistance incurred by us in the event that the staff member does not complete the move, resigns, or is discharged for cause within two years of the employment start date or relocation date, as applicable (with apro-rata refund in the second year).
Compensation Policies and Practices
Recoupment Provisions
Our cash incentive award programs (EIP, GMIP, and GPIP) expressly allow the Compensation Committee, or management, as appropriate, to consider employee misconduct that caused serious financial or reputational damage to the Company when determining whether an employee has earned an annual cash incentive award or the amount of
any such award. This provision is not intended to limit any other action that the Company could take against an employee, including other disciplinary actions (up to termination), ordinary course performance considerations, disclosure of wrongdoing to the government, and pursuit of any other legal claims against such employees.
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Clawback Policy
We have a clawback policy that requires our Board to consider recapturing past cash or equity compensation payouts awarded to our executive officers, including our NEOs, if it is subsequently determined
that the amounts of such compensation were determined based on financial results that are later restated and the executive officer’s misconduct caused or partially caused such restatement.
Stock Ownership and Retention Guidelines
Our stock ownership guidelines require our executives to hold a meaningful amount of our Common Stock, promote a long-term
perspective in managing the Company, further aligning the interests of our executives and stockholders and mitigating potential compensation-related risk. Our guidelines require that each officer who has not met their ownership requirements must retain shares of our Common Stock acquired through the vesting of RSUs, the payout of performance units, and the exercise of stock options awarded net of shares retained by us to satisfy associated tax withholding requirements and exercise price amounts, until such officer has reached his or her required stock ownership level.
ï 2020 Proxy Statement 61
Compensation Discussion and Analysis |
Stock Ownership Guidelines Requirements
The stock ownership guidelines for 20182019 were:
Position | Stock Ownership Requirement | Compliance | ||
Chief Executive Officer(1) | 6x base salary | ✓ | ||
Executive Vice President | 3x base salary | ✓ | ||
Senior Vice President | 2x base salary | ✓ | ||
Vice President | 1x base salary | ✓ |
| (1) | Mr. Bradway exceeded his ownership requirement and holds approximately |
The following holdings count towards satisfying these stock ownership requirements:
shares of our Common Stock beneficially held that are not subject to forfeiture restrictions;
shares of our Common Stock held through a 401(k) plan or other qualified pension or profit-sharing plan; and
shares purchasable with funds then allocated under our Employee Stock Purchase Plan.
Executives are generally given five years following their placement into a given job level to comply with these guidelines. Executives who are promoted to a status with a stock ownership level higher than the executive was previously required to satisfy, have three years to comply with the new ownership level if the executive has been subject to the stock ownership guidelines for five or more years. Once these ownership guidelines are met, executives are required to maintain such ownership until they change job levels or are no longer employed by us. As of November 9, 2018,October 18, 2019, the effective date of our executive certifications, all executive officers, including our NEOs, who were expected to meet such guidelines, were in compliance. Messrs.Mr. Gordon Meline, and Graham commenced employment with our Company on September 3, 2018 July 21, 2014, and July 13, 2015, and havehas until 2023 2019, and 2020, respectively, to meet theirhis guidelines. Dr. Reese wasand Mr. Graham were promoted from a Senior Vice President to an Executive Vice President roles on July 26, 2018 and hasOctober 22, 2019, respectively, and, as a result, now have until 2021 and 2023 to comply with the new ownership level associated with the Executive Vice President role.
Insider Trading Policy and Practices
All staff members and our Board are prohibited from: (i) buying or selling our Common Stock while aware of any material nonpublic information; (ii) engaging in short sales with respect to our Common Stock; (iii) pledging or purchasing our Common Stock on margin; or (iv) entering into any derivative, hedging, or similar transactions with respect to our Common Stock.Stock, including any transactions that hedges or offsets, or is designed to hedge or offset, any decrease in the market value of Amgen stock. Examples of prohibited derivative transactions include, but are not limited to, purchases or sales of puts and calls (whether written or purchased or sold), options (whether “covered” or not), forward contracts, including but not limited to prepaid variable forward contracts; put and call “collars” (“European” or “American”),
“equity” or “performance” swap or exchange agreements or any similar agreements or arrangements, however denominated, in our securities.
Policies for Grants of Long-Term Incentive Equity Awards
In accordance with our equity awards policy, our regular annual LTI equity award grants are typically approved at anin-person or telephonic meeting ofby the Compensation Committee (for grants of equity awards to Senior Management, including our NEOs) or the Equity Award Committee (for grants to all other staff members) with a grant date that is the third business day after the release of our next quarterly or annual earnings announcement after the date of determination by our Compensation Committee or Equity Award Committee, as applicable. In unusual circumstances, LTI equity awards may be approved by the Compensation Committee or Equity Award Committee by unanimous written consent. Our NEOs may also receive special equity awards as determined by the Compensation Committee as new hires or for recognition and retention, promotions, or other purposes, but generally also only on the third business day after the release of our quarterly or annual earnings after the date of determination by our Compensation Committee and the relevant new hire, promotion, or other date.
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Tally Sheets
The Compensation Committee annually reviews tally sheets for each NEO, setting forth all components of compensation, including compensation payable at termination, retirement, or a change of control. These tally sheets summarize the number of shares and the value at a given price of the LTI equity awards held by each NEO, as well as each NEO’s individual cumulative account balances in our benefit plans. These tools are employed by the Compensation Committee as a useful check on total annual compensation and the cumulative impact of our long-term programs and are considered important to understand both the overall and longer-term impact of compensation decisions.
The Compensation Committee may increase or decrease certain individual elements of compensation to align total compensation with peer group market data and to promote internal equity among our
NEOs, other than our CEO, and use the information provided by these tally sheets to make such determination. No material adjustments to total compensation for any of our NEOs were made as a result of the review of these tally sheets by the Compensation Committee in 2018.2019.
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Compensation Discussion and Analysis |
Stockholder Outreach—Executive Compensation Website
We maintain a website accessible throughout the year atwww.amgen.com/executivecompensation, which provides a link to our most recent proxy statement and invites our stockholders to fill out a survey to provide input and feedback to the Compensation Committee regarding our executive compensation policies and practices. All input from our stockholders is valuable and the Compensation Committee appreciates your time and effort in completing the survey.
Approach to Pricing Our Products
We take a thoughtful approach to pricing our products and have internal processes and controls in place to ensure that pricing decisions are thoroughly and appropriately vetted prior to implementation with involvement from senior management. This process includes routine presentations to our Corporate Responsibility and Compliance Committee
and our Board on drug pricing practices. Our strategy includes a focus on innovative drugs that can deliver volume-driven growth, not simply price. And, in 2019, our revenues benefited from volume-driven growth from a number of our newer innovative medicines that grew units double digit or better, including Repatha, Parsabiv, BLINCYTO, Aimovig, and Prolia, rather than price increases. We have and continue to disclose in our annual report on Form 10-K and our quarterly reports on Form 10-Q, the pricing trends impacting our business, including, for 2019, that we continued to expect a lower net selling price in the aggregate compared with that of 2018. We believe that we have the appropriate governance mechanisms, oversight and processes in place to ensure that pricing decisions are made in-line with our values and our mission to serve patients. In addition, our Compensation Committee annually completes a thoughtful and rigorous evaluation of our executive compensation program for alignment with our mission to serve patients and deliver stockholder value without encouraging excessive or inappropriate risk-taking by our executives.
Non-Direct Compensation and Payouts in Certain Circumstances
Change of Control Benefits and Offer Letter With Limited Severance Benefits
Our CEO and other NEOs are participants in our double-trigger Change of Control Severance Plan discussed below. In connection with new hires, we typically enter into offer letters detailing their initial compensation and requirements to pay back certain elements of compensation. To attract talented executives from outside the Company, our offer letters generally include severance terms that apply to terminations initiated by us and occur for reasons other than for “cause” within three years from the date of hire. These benefits are sometimesgenerally provided to officer-level candidates to provide an incentive for them to join us by reducing the risks associated with making such a job change. Other than the foregoing, our CEO and NEOs are not covered by contractual arrangements that provide for severance or other benefits in the event of termination.
Offer Letter—Mr. Gordon
Mr. Gordon, who commenced employment as our Executive Vice President, Global Commercial Operations, effective September 3, 2018, is currently subject to an offer letter that was negotiated in connection with his hiring. The terms of the offer letter were approved by the Compensation Committee. Mr. Gordon’s offer letter included our standard relocation assistance to facilitate Mr. Gordon’s relocation from New Jersey to California with a temporary housing allowance of an additional 60 days (for a total of 120 days) and up to $12,000 per month. We agreed to provide Mr. Gordon with a base salary of $1 million, and a target annual cash incentive award opportunity of 100% of base salary, each of which was targeted at the Market Median and such target annual cash incentive award opportunity is consistent with that of each of the other Executive Vice Presidents. We also agreed to provide Mr. Gordon with a $2 millionsign-on bonus to replace the value of Mr. Gordon’s 2018 bonus with his previous employer which was forfeited upon him leaving his current position and to induce Mr. Gordon to accept our offer.California. We also agreed to provide Mr. Gordon with RSUs valued at $6.4 million. To align with the
value being replaced, this grant will vestvests over three years beginning on the first anniversary of the grant date through the third anniversary at a rate of 35%, 35%, and 30% each year, respectively, contingent upon Mr. Gordon being actively employed with us through each vesting date. WeTo further induce
Mr. Gordon to join our Company, we also agreed to provide Mr. Gordon with performance units valued at $3.5 million which vest at the end of the performance period (November 2, 2018 to December 31, 2020) contingent upon Mr. Gordon being actively employed through the vesting date to further induce Mr. Gordon to join our Company.date. The Compensation Committee concluded that these LTI equity award values were appropriate because they provide compensation that is focused on the longer-term to compensate Mr. Gordon for equity forfeited as a result of his leaving his previous employer, to induce him to join the Company, and to provide long-term incentives that tie a significant portion of Mr. Gordon’s compensation to the value of our stock in alignment with our stockholders’ interests. See “Initial Hire and Promotion Equity Awards” above for a full description of the LTI equity awards provided to Mr. Gordon. To compensate for Mr. Gordon’s forfeiture of certain pension benefits at his previous employer, Mr. Gordon was also provided with a contribution to his Deferred Compensation Plan of $1 million which will vestvests at a rate of 33%, 33%, and 34% each year through the third anniversary of his date of employment with us as long as Mr. Gordon remains actively and continuously employed by us. We also agreed to reimburse Mr. Gordon for any claim resulting from Mr. Gordon’s employment with us due to any recoupment from Mr. Gordon by his previous employer for previously earned compensation (up to $2 million). Mr. Gordon’s offer letter provides for cash severance protection for three years following his employment date equal to two year’s annual base salary and target annual cash incentive award, plus up to 18 months of COBRA(1) medical and dental coverage paid for by us. As discussed above, benefits of this type are often provided to officer-level candidates to provide an incentive to them to join our Company by reducing the risk of making such a job change. These severance benefits expire on September 3, 2021, and are payable only if Mr. Gordon is terminated other than for “cause.”
| (1) | The Consolidated Omnibus Budget Reconciliation Act of 1985. |
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Compensation Discussion and Analysis
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Change of Control Benefits
Change of Control Severance Plan
In the event of a change of control and a qualifying termination, our Change of Control Severance Plan provides severance payments to 1,5811,661 U.S. staff members (as of December 31, 2018)2019), including each NEO. There are no taxgross-up payments provided under the plan. The plan is structured so that payments and benefits are provided only if there is both a change of control and a termination of employment, either by us other than for “cause” or “disability” or by the participant for “good reason” (as each is defined in the plan)—sometimes referred to as a “double-trigger”—because the intent of the plan is to provide appropriate severance benefits in the event of a termination following a change of control, rather than to provide a change of control bonus. The cash severance multiple for our CEO and all other NEOs is two times annual cash compensation. The payments and benefit levels under the Change of Control Severance Plan do not influence and were not influenced by other elements of compensation. The Change of Control Severance Plan was adopted, and is continued by the Compensation Committee:
To reinforce and encourage the continued attention and dedication of members of management to their assigned duties without the distraction arising from the possibility of a change of control;
To enable and encourage management to focus their attention on obtaining the best possible deal for our stockholders and making an independent evaluation of all possible transactions, without being influenced by their personal concerns regarding the possible impact of various transactions on the security of their jobs and benefits; and
To provide severance benefits to any participant who incurs a termination of employment under the circumstances described within a certain period following a change of control in recognition of their contributions to the Company.
Change of Control Treatment of Long-Term Incentive Equity Awards
Restricted Stock Units and Stock Options
All unvested RSUs and stock options have “double-trigger” acceleration of vesting that requires a qualifying termination in connection with a change of control. All RSUs and stock options vest in full only if the grantee’s employment is involuntarily terminated other than for “cause” or “disability,” or, in the case of staff members subject to the Change of Control Severance Plan, voluntarily terminated with “good reason,” in each case within two years following a change of control.
Performance Units
The Compensation Committee has maintained change of control features for each of the performance periods under our performance award programs to ensure that these programs reward participants for our performance until the successful closing of any change of control. In general, the performance units are earned based on a truncated
performance period and our performance through any change of control
(or (or target performance for the operating measures if the change of control occurs in the first year of a performance period). If the change of control occurs within the first six months of a performance period, the amount earned ispro-rated based on the number of months of the performance period prior to the change of control. In the event of a termination of employment due to death, disability, or retirement, our performance units provide for potentialearn-out at the end of the performance period based on actual results with the amount earnedpro-rated based on the termination date. For additional information on the levels of payout, see “Potential Payments Upon Termination or Change of Control—Long-Term Incentive Equity Awards—Performance Units” in our Executive Compensation Tables.
Limited Retirement Benefits and Deferred Compensation Plan
Health, retirement, and other benefits programs are generally available to our U.S.-based staff members, including our NEOs, and are typically targeted to align in value with our peer group. The primary survey used to make this comparison is the Aon Hewitt Benefit Index®, last updated as of May 2018, using a comparator group of 14 companies chosen by Amgen as representative of its peer group. The data generated from this survey is used by the Compensation Committee and management in evaluating the competitive positioning and program design of these health, retirement, and other benefit programs.
Retirement and Savings Plan, Supplemental Retirement Plan, and Nonqualified Deferred Compensation Plan
Our Retirement and Savings Plan, or 401(k) Plan, is available to U.S.-based staff members of the Company and participating subsidiaries. All 401(k) Plan participants are eligible to receive the same proportionate level of matching and core contributions from us.
We credit to our Supplemental Retirement Plan, or SRP, which is available to all 401(k) Plan participants, Company core and matching contributions on eligible compensation that cannot be made to the 401(k) Plan because they relate to compensation that is in excess of the maximum amount of recognizable compensation allowed under the Internal Revenue Code’s qualified plan rules. We also credit staff members in the SRP for lost 401(k) Plan Company match and core contributions resulting from making a deferral into the Nonqualified Deferred Compensation Plan, or NDCP. Earnings under the SRP are market-based—there are no “above market” or guaranteed rates of returns offered in this plan and this plan enables us to provide the same percentage of base salary and annual cash incentive award as a retirement contribution to U.S.-based staff members at all levels. SRP and NDCP participants can direct notional account investments using the 401(k) Plan investing structure (excluding self-direct brokerage and our Company stock) as well as a variety of target date funds. Unlike a traditional pension plan, which provides a lifetime annuity that replaces a significant portion of a participant’s final pay, retirement benefits from our 401(k) Plan and SRP are based on the investment return on the staff member’s own investment elections, with the participant bearing the investment risk. The NDCP offers all U.S.-based staff members (including Puerto Rico) at director level and above the
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Compensation Discussion and Analysis
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members (including Puerto Rico) at director level and above the opportunity to defer eligible base salary and annual cash incentive awards, up to maximum amounts typical at our peer group. We also have the discretion to make contributions to this plan, but we do not make such contributions on a regular basis. We believe that offering the NDCP is appropriate because it provides executives the opportunity to save for retirement in atax-effective fashion that is not readily available without our sponsorship.
Health Savings Account and Retiree Medical Savings Account Plan for all U.S.-based Staff Members
Effective January 1, 2016, we offeredWe offer a high deductible health plan and a health savings account that is generally available to U.S.-based
(excluding (excluding Puerto Rico) staff
members. We also maintain a Retiree Medical Savings Account Plan available to U.S.-based (excluding Puerto Rico) staff members that allows all staff members to makeafter-tax deferrals to be used post-termination to reimburse them for eligible medical expenses. Under the Retiree Medical Savings Account Plan, the Company credits all eligible staff members with an annual contribution ($1,000) and makes a matching contribution equal to 50% of a staff member’s deferrals (up to a match of $1,500 per year). Company credits can be accessed to reimburse eligible medical expenses of staff members who terminate having fulfilled the Company’s retirement criteria. We do not offer a traditional Company-paid retiree medical plan to our NEOs or other U.S.-based staff members.
Taxes and Accounting Standards
Tax Deductibility Under Section 162(m) of the Internal Revenue Code
On December 22, 2017,Section 162(m) of the Tax Cuts and Jobs Act, or Tax Reform Act, was signed into law for taxable years beginning after December 31, 2017. The Tax Reform Act made a number of significant changes to Internal Revenue Code Section 162(m). Section 162(m) places a $1��$1 million limit on the amount of compensation that we may deduct for income tax purposes for any year with respect to compensation paid to “covered employees.”
Prior to the Tax Reform Act, covered employees included the executive who served as our CEO atyear-end, and any of our three other most highly compensated employees who served as executive officers, other than our Chief Financial Officer. The $1 million limit did not apply, however, to performance-based compensation, as defined under Section 162(m). Our 2017 executive compensation program, which was implemented prior to the enactment of the Tax Reform Act, was designed with the intent to provide cash incentive compensation under our EIP, performance units under our performance award program, and stock options under our equity incentive plan as qualifying performance-based compensation. RSUs did not qualify for the performance-based exception.
For tax years beginning after December 31, 2017, the Tax Reform Act revised the definition ofa covered employee to includeincludes an executive officer of a publicly held corporation who holds the positions of either principal executive officer, or PEO, or principal financial officer, or PFO, at any time during the tax year, as well as an executive officer whose total compensation for the tax year is required to be reported to shareholders under the Securities Exchange Act of 1934 by reason of such employee being among the three highest compensated officers for the taxable year (excluding the PEO and PFO), regardless of whether the executive officer is serving at year end. In addition, if an individual is a covered employee for a tax year beginning after December 31, 2016, the individual remains a covered employee for all future years. As a resultBecause of the changes to the definition of covered employee,this“once-a-covered-employee,always-a-covered-employee” rule, the total number of our covered employees in 20182019 is higher than in 2017 and can be expected to grow in future years due to the “once a covered employee, always a covered employee” rule.2018.
In addition2017, The Tax Cuts and Jobs Act, or Tax Reform Act, was signed into law effective for taxable years beginning after December 31, 2017. Prior to changing the definition of covered employee, the Tax Reform Act, alsothe $1 million limit did not apply to performance-based compensation, as defined. While the Tax Reform Act eliminated the exception for performance-based compensation.
Acompensation, a transition rule applies to grandfathercontinues the exception of performance-based compensation which is provided pursuant to a written binding contract that was
in effect on November 2, 2017 and which is not modified in any material respect on or after such date. An Internal Revenue Service notice has clarified that plans that permit negative discretion do not qualify for grandfathering to the extent that exercise of negative discretion could reduce the compensation. Under the transition rule, compensation related to the exercise of stock options issuedgranted on or before November 2, 2017, and compensation earned with respect to performance units granted prior to November 2, 2017, shouldis anticipated to qualify for grandfathering,the exception for performance-based compensation under the transition rules, provided that such contracts are not materially modified after that date. However, our annual cash bonus compensation for the 2017 year that was paid in March 2018 does not qualify for grandfathering since it was performance-based compensation that provided for negative discretion.
Because the performance-based compensation exception was eliminated, compensation grants that we made in 2018 to each covered employee that would have previously qualified for the exception, including stock options, performance units, and annual cash bonuses, will be included in calculation of the amount that is paid to the covered employee that is not deductible to the extent such compensation exceeds the $1 million limit. The cash tax impact for 20182019 of compensation not being deductible due to the Section 162(m) limit is approximately $4.2$4.8 million, assuming the Company’s U.S. combined effective tax rate for 2018.2019.
Accounting Standards
Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718 requires us to recognize an expense for the fair value of equity-based compensation awards. Grants of stock options, RSUs, and performance units under our LTI equity award plans are accounted for under FASB ASC Topic 718. The Compensation Committee regularly considers the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our LTI equity award plans and programs. For
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example, the Compensation Committee modified our Employee Stock Purchase Plan to make itnon-compensatory under the “safe harbor” provisions of the accounting rules and, therefore, we no longer recognize compensation expense under this plan. As accounting
standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.
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Executive Compensation Tables
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Summary Compensation Table
The following table sets forth summary information concerning the compensation awarded to, paid to, or earned by each of our Named Executive Officers, or NEOs.
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||||||||||||
Performance Units and Restricted Stock Units | Stock Options | EIP/GMIP | ||||||||||||||||||||||||||||||
Robert A. Bradway Chief Executive Officer and President
|
|
2018 2017 2016 |
|
|
1,566,000 1,555,962 1,531,731 |
|
|
0 0 0 |
|
|
8,749,818 8,399,812 7,699,723 |
|
|
3,749,994 3,599,974 3,299,994 |
|
|
3,898,000 2,683,000 3,650,000 |
|
|
591,454 661,041 668,553 |
|
|
18,555,266 16,899,789 16,850,001 |
| ||||||||
Anthony C. Hooper Former Executive Vice President, Global Commercial Operations
|
|
2018 2017 2016 |
|
|
1,057,050 1,050,173 1,031,788 |
|
|
0 0 0 |
|
|
2,799,925 2,799,937 2,799,874 |
|
|
1,199,995 1,199,973 1,199,995 |
|
|
1,754,000 1,207,000 1,639,000 |
|
|
254,489 295,467 294,528 |
|
|
7,065,459 6,552,550 6,965,185 |
| ||||||||
Murdo Gordon(6) Executive Vice President, Global Commercial Operations
|
|
2018 |
|
|
330,769 |
|
|
2,000,000 |
|
|
9,899,861 |
|
|
0 |
|
|
513,000 |
|
|
1,336,604 |
|
|
14,080,234 |
| ||||||||
Sean E. Harper Former Executive Vice President, Research and Development
|
|
2018 2017 2016 |
|
|
977,746 970,769 946,246 |
|
|
0 0 0 |
|
|
2,799,925 2,589,867 2,449,925 |
|
|
1,199,995 1,110,000 1,049,986 |
|
|
1,623,000 1,116,000 1,502,000 |
|
|
234,212 269,731 264,885 |
|
|
6,834,878 6,056,367 6,213,042 |
| ||||||||
David W. Meline Executive Vice President and Chief Financial Officer
|
|
2018 2017 2016 |
|
|
977,746 970,769 946,733 |
|
|
0 0 0 |
|
|
2,799,925 2,449,878 2,449,925 |
|
|
1,199,995 1,049,990 1,049,986 |
|
|
1,623,000 1,116,000 1,503,000 |
|
|
260,102 271,651 268,821 |
|
|
6,860,768 5,858,288 6,218,465 |
| ||||||||
David M. Reese(7) Executive Vice President, Research and Development
|
|
2018 |
|
|
697,500 |
|
|
300,000 |
|
|
3,029,787 |
|
|
269,966 |
|
|
913,000 |
|
|
129,019 |
|
|
5,339,272 |
| ||||||||
Jonathan P. Graham(8) Senior Vice President, General Counsel and Secretary
|
|
2018 2017 2016 |
|
|
938,596 932,577 916,789 |
|
|
0 0 1,000,000 |
|
|
1,959,878 1,749,939 1,609,898 |
|
|
839,983 749,997 689,990 |
|
|
1,402,000 858,000 1,165,000 |
|
|
204,901 231,695 1,038,668 |
|
|
5,345,358 4,522,208 6,420,345 |
| ||||||||
| Name and Principal Position | Year | Salary ($) | (1) | Bonus ($) | Stock Awards ($) | (2) | Option Awards ($) | (3) | Non-Equity Incentive Plan Compensation ($) | (4) | All Other Compensation ($) | (5) | Total ($) | |||||||||||||||||||
Performance Units and Restricted Stock Units | Stock Options | EIP | ||||||||||||||||||||||||||||||
Robert A. Bradway Chief Executive Officer and President | 2019 2018 2017 | 1,600,923 1,566,000 1,555,962 | 0 0 0 | 9,799,716 8,749,818 8,399,812 | 4,199,985 3,749,994 3,599,974 | 3,321,000 3,898,000 2,683,000 | 691,169 591,454 661,041 | 19,612,793 18,555,266 16,899,789 | ||||||||||||||||||||||||
Murdo Gordon Executive Vice President, Global Commercial Operations | 2019 2018 | 1,025,673 330,769 | 0 2,000,000 | 2,799,711 9,899,861 | 1,199,970 0 | 1,418,000 513,000 | 212,482 1,336,604 | 6,655,836 14,080,234 | ||||||||||||||||||||||||
David W. Meline Executive Vice President and Chief Financial Officer | 2019 2018 2017 | 999,049 977,746 970,769 | 0 0 0 | 2,799,711 2,799,925 2,449,878 | 1,199,970 1,199,995 1,049,990 | 1,382,000 1,623,000 1,116,000 | 292,840 260,102 271,651 | 6,673,570 6,860,768 5,858,288 | ||||||||||||||||||||||||
David M. Reese Executive Vice President, Research and Development | 2019 2018 | 974,433 697,500 | 0 300,000 | 2,799,711 3,029,787 | 1,199,970 269,966 | 1,348,000 913,000 | 215,811 129,019 | 6,537,925 5,339,272 | ||||||||||||||||||||||||
Jonathan P. Graham Executive Vice President, General Counsel and Secretary | 2019 2018 2017 | 959,113 938,596 932,577 | 0 0 0 | 3,959,666 1,959,878 1,749,939 | 839,997 839,983 749,997 | 1,220,000 1,402,000 858,000 | 261,194 204,901 231,695 | 7,239,970 5,345,358 4,522,208 | ||||||||||||||||||||||||
| (1) | Reflects base salary earned in eachbi-weekly pay period (or portion thereof) during each fiscal year beforepre-tax contributions and, therefore, includes compensation deferred under our qualified deferred compensation plan and nonqualified deferred compensation plan, or NDCP. Under payroll practices for salaried staff members of our U.S. entities, including our NEOs, base salary earned in a pay period is computed by dividing the annual base salary then in effect by 26, which is the number of fullbi-weekly pay periods in a year. |
| (2) | For |
66 ï 2020 Proxy Statement
Executive Compensation Tables |
The number of units to be earned for the performance units granted during |
ï 2019 Proxy Statement 67
|
measures are performance conditions, as defined under ASC 718. The values shown in this table and the “Grants of Plan-Based Awards” table are based on probable outcomes of these performance conditions. The table below shows the grant date fair values of these performance unit awards: (1) if the maximum is achieved with regard to all of the operating performance measures which would result in an earnout of 170% based on the operating performance measures with the TSR market condition at target, with no increase or decrease based on the market condition; and (2) if the maximum is achieved with regard to all of the operating performance measures and maximum performance occurs under the TSR market condition which results in an additional 30% earnout, for total earned payout of 200% of performance units granted. |
| Fair Value of Performance Units for the 2018-2020 Performance Period | ||||||||||||||||
| Fair Value of Performance Units for the 2019-2021 Performance Period | Fair Value of Performance Units for the 2019-2021 Performance Period | |||||||||||||||
| Name | Based on the Maximum Performance Regarding the 2018-2020 Operating Performance Measures | Based on the Maximum Performance Regarding the Operating Performance Measures and Maximum Payout for the TSR Modifier | Based on the Maximum Performance Regarding the 2019-2021 Operating Performance Measures | Based on the Maximum Performance Regarding the Operating Performance Measures and Maximum Payout for the TSR Modifier | ||||||||||||
Robert A. Bradway |
| $10,624,727 |
|
| $12,499,879 |
|
| $11,899,532 |
|
| $13,999,627 |
| ||||
Anthony C. Hooper |
| $3,399,739 |
|
| $3,999,871 |
| ||||||||||
Murdo Gordon |
| $5,949,902 |
|
| $6,999,955 |
|
| $3,399,678 |
|
| $3,999,732 |
| ||||
Sean E. Harper |
| $3,399,739 |
|
| $3,999,871 |
| ||||||||||
David W. Meline |
| $3,399,739 |
|
| $3,999,871 |
|
| $3,399,678 |
|
| $3,999,732 |
| ||||
David M. Reese |
| $764,748 |
|
| $899,725 |
|
| $3,399,678 |
|
| $3,999,732 |
| ||||
Jonathan P. Graham |
| $2,379,949 |
|
| $2,799,985 |
|
| $2,379,680 |
|
| $2,799,624 |
| ||||
| (3) | For |
| (4) | Reflects amounts that were earned under our Executive Incentive Plan, or EIP, for |
| (5) | See the subsection “All Other Compensation—Perquisites and Other Compensation” immediately following these footnotes. |
|
|
|
All Other Compensation—Perquisites and Other Compensation
Perquisites. The amounts reported reflect the aggregate incremental cost of perquisites and other personal benefits provided to our NEOs and are included in the “All Other Compensation” column of the “Summary Compensation Table.” The following table sets forth the perquisites provided to our NEOs in 2018.2019.
| Personal Use of Company Aircraft(1) | Personal Use of Company Car and Driver(2) | Personal Financial Planning Services | Moving and Relocation Expenses(3) | Other(4) | Personal Use of Company Aircraft(1) | Personal Use of Company Car and Driver(2) | Personal Financial Planning Services | Moving and Relocation Expenses(3) | Other(4) | |||||||||||||||||||||||||||||||||||||||||||||||
| Name | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Tax Gross- Up($) | Aggregate Incremental Cost($) | Total($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Tax Gross- Up($) | Aggregate Incremental Cost($) | Total($) | ||||||||||||||||||||||||||||||||||||||||||
Robert A. Bradway |
| 88,884 |
|
| 4,091 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 59,179 |
|
| 167,154 |
|
| 106,505 |
|
| 4,306 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 16,173 |
|
| 141,984 |
| ||||||||||||||
Anthony C. Hooper |
| 0 |
|
| 805 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 12,684 |
|
| 28,489 |
| |||||||||||||||||||||||||||||||||||
Murdo Gordon |
| 0 |
|
| 0 |
|
| 3,904 |
|
| 213,287 |
|
| 94,381 |
|
| 1,955 |
|
| 313,527 |
|
| 209 |
|
| 47 |
|
| 15,000 |
|
| 4,347 |
|
| 34,879 |
|
| 10,354 |
|
| 64,836 |
| ||||||||||||||
Sean E. Harper |
| 0 |
|
| 0 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 10,212 |
|
| 25,212 |
| |||||||||||||||||||||||||||||||||||
David W. Meline |
| 24,237 |
|
| 1,365 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 10,500 |
|
| 51,102 |
|
| 204 |
|
| 3,113 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 12,758 |
|
| 31,075 |
| ||||||||||||||
David M. Reese |
| 0 |
|
| 0 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 10,500 |
|
| 25,500 |
|
| 0 |
|
| 0 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 12,497 |
|
| 27,497 |
| ||||||||||||||
Jonathan P. Graham |
| 0 |
|
| 79 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 10,522 |
|
| 25,601 |
|
| 209 |
|
| 76 |
|
| 15,000 |
|
| 0 |
|
| 0 |
|
| 10,221 |
|
| 25,506 |
| ||||||||||||||
| (1) | The aggregate incremental cost of use of our aircraft for personal travel by our NEOs is allocated entirely to the highest ranking NEO present on the flight (except foron-board catering costs which are allocated to each NEO present). If each NEO present on the flight is the same level, the aggregate incremental costs of use of our aircraft for personal travel is allocated to each NEO present. The aggregate incremental cost for personal use of our aircraft is calculated based on our variable operating costs, |
68 ï 2019 Proxy Statement
|
which include crew travel expenses,on-board catering, landing fees, trip-related hangar/parking costs, fuel, trip-related maintenance, and other smaller variable costs. In determining the incremental cost relating to fuel and trip-related maintenance, we applied an estimate derived from our average costs. We believe that the use of this methodology for |
| (2) | The aggregate incremental cost for personal use of the car and driver provided by us is determined as the sum of the cost of fuel, driver overtime costs allocable to personal usage, and maintenance costs for the total number of personal miles driven. Personal miles include travel to and from work from home. As the cars are used primarily for business travel, fixed costs that would be incurred by us to operate the company cars for business use such as car lease or rental costs and driver salaries are not included. |
ï 2020 Proxy Statement 67
Executive Compensation Tables |
| (3) | Mr. Gordon agreed to relocate from New Jersey to Thousand Oaks, California to serve as Executive Vice President, Global Commercial Operations commencing in September 2018. The incremental cost of certain relocation benefits that were provided to Mr. Gordon in |
| (a) | $ |
|
|
|
$ |
| (4) | Other expenses |
|
|
Other Compensation. The following table sets forth compensation for our NEOs in 20182019 incurred in connection with our 401(k) Retirement and Savings Plan, or 401(k) Plan, our NDCP, and our Supplemental Retirement Plan, or SRP. These amounts, along with the perquisites and other compensation discussed above, are included in the “All Other Compensation” column of the “Summary Compensation Table.” See “Nonqualified Deferred Compensation” below for a description of these plans.
| Name | Company Contributions to 401(k) Retirement and Savings Plan($) |
Company Credits to Non-Qualified |
Company Credits to Supplemental Retirement Plan($) | Total($) | Company Contributions to 401(k) Retirement and Savings Plan($) |
Company Credits to Non-Qualified |
Company Credits to Supplemental Retirement Plan($) | Total($) | ||||||||||||||||||||||||
Robert A. Bradway |
| 27,500 |
|
| 0 |
|
| 396,800 |
|
| 424,300 |
|
| 28,000 |
|
| 0 |
|
| 521,185 |
|
| 549,185 |
| ||||||||
Anthony C. Hooper |
| 27,500 |
|
| 0 |
|
| 198,500 |
|
| 226,000 |
| ||||||||||||||||||||
Murdo Gordon |
| 19,808 |
|
| 1,000,000 |
|
| 3,269 |
|
| 1,023,077 |
|
| 22,231 |
|
| 0 |
|
| 125,415 |
|
| 147,646 |
| ||||||||
Sean E. Harper |
| 27,500 |
|
| 0 |
|
| 181,500 |
|
| 209,000 |
| ||||||||||||||||||||
David W. Meline |
| 27,500 |
|
| 0 |
|
| 181,500 |
|
| 209,000 |
|
| 28,000 |
|
| 0 |
|
| 233,765 |
|
| 261,765 |
| ||||||||
David M. Reese |
| 27,500 |
|
| 0 |
|
| 76,019 |
|
| 103,519 |
|
| 28,000 |
|
| 0 |
|
| 160,314 |
|
| 188,314 |
| ||||||||
Jonathan P. Graham |
| 27,500 |
|
| 0 |
|
| 151,800 |
|
| 179,300 |
|
| 28,000 |
|
| 0 |
|
| 207,688 |
|
| 235,688 |
| ||||||||
20192020 Proxy Statement 69
|
Executive Compensation Tables
|
|
Grants of Plan-Based Awards
The following table sets forth summary information regarding all grants of plan-based awards made to our NEOs for the year ended December 31, 2018.2019. All of our equity based awards were granted under the Amgen Inc. 2009 Equity Incentive Plan, as amended.
Estimated Future Payouts |
Estimated Future | All Other | All Other (#)(6) | Exercise ($/Sh) | Grant Date |
Estimated Future Payouts |
Estimated Future Payouts | All Other | All Other (#)(5) | Exercise ($/Sh) | Grant Date
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Approval Date(1) | Threshold | Target | Maximum | Threshold | Target | Maximum | Grant Date | Approval Date(1) | Threshold | Target | Maximum | Threshold | Target | Maximum | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EIP/GMIP | Performance Units | RSUs | Stock Options | EIP/GMIP | Performance Units | RSUs | Stock Options | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert A. Bradway | 3/7/18 | 3/7/18 | (3) | (3) | 11,966,250 | 3/6/19 | 3/6/19 | (2) | (2) | 11,285,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18 | 3/7/18 | (4) | 33,107 | 66,214 | 6,249,939 | (7) | 5/3/19 | 3/6/19 | (3) | 37,154 | 74,308 | 6,999,814 | (6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18 | 3/7/18 | 14,087 | 2,499,879 | (8) | 5/3/19 | 3/6/19 | 15,791 | 2,799,902 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 4/27/18
|
|
| 3/7/18
|
|
| 108,444
|
|
| 177.46
|
| 3,749,994 | (9) |
| 5/3/19
|
|
| 3/6/19
|
|
| 137,840
|
|
| 177.31
|
| 4,199,985 | (8) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Anthony C. Hooper | 3/7/18 | 3/7/18 | (3) | (3) | 7,179,750 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18 | 3/7/18 | (4) | 10,594 | 21,188 | 1,999,935 | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18 | 3/7/18 | 4,508 | 799,990 | (8) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 4/27/18
|
|
| 3/7/18
|
|
| 34,702
|
|
| 177.46
|
| 1,199,995 | (9) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Murdo Gordon | 9/3/18 | (2) | 9/3/18 | (2) | (3) | 307,692 | (2) | 692,307 | (2) | 3/6/19 | 3/6/19 | (2) | (2) | 6,771,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/2/18 | 7/20/18 | (4) | 17,699 | 35,398 | 3,499,977 | (10) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 11/2/18
|
|
| 7/20/18
|
|
| 34,213
|
| 6,399,884 | (8) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sean E. Harper | 3/7/18 | 3/7/18 | (3) | (3) | 7,179,750 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18 | 3/7/18 | (4) | 10,594 | 21,188 | 1,999,935 | (7) | 5/3/19 | 3/6/19 | (3) | 10,615 | 21,230 | 1,999,866 | (6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18 | 3/7/18 | 4,508 | 799,990 | (8) | 5/3/19 | 3/6/19 | 4,511 | 799,845 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 4/27/18
|
|
| 3/7/18
|
|
| 34,702
|
|
| 177.46
|
| 1,199,995 | (9) |
| 5/3/19
|
|
| 3/6/19
|
|
| 39,382
|
|
| 177.31
|
| 1,199,970 | (8) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David W. Meline | 3/7/18 | 3/7/18 | (3) | (3) | 7,179,750 | 3/6/19 | 3/6/19 | (2) | (2) | 6,771,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18 | 3/7/18 | (4) | 10,594 | 21,188 | 1,999,935 | (7) | 5/3/19 | 3/6/19 | (3) | 10,615 | 21,230 | 1,999,866 | (6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18 | 3/7/18 | 4,508 | 799,990 | (8) | 5/3/19 | 3/6/19 | 4,511 | 799,845 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 4/27/18
|
|
| 3/7/18
|
|
| 34,702
|
|
| 177.46
|
| 1,199,995 | (9) |
| 5/3/19
|
|
| 3/6/19
|
|
| 39,382
|
|
| 177.31
|
| 1,199,970 | (8) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David M. Reese | 3/7/18 | 3/7/18 | (3) | (3) | 4,786,500 | 3/6/19 | 3/6/19 | (2) | (2) | 6,771,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18 | 3/7/18 | (4) | 2,383 | 4,766 | 449,863 | (7) | 5/3/19 | 3/6/19 | (3) | 10,615 | 21,230 | 1,999,866 | (6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/2/18 | 5/21/18 | 12,830 | 2,399,980 | (8) | 5/3/19 | 3/6/19 | 4,511 | 799,845 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18 | 3/7/18 | 1,014 | 179,944 | (8) |
| 5/3/19
|
|
| 3/6/19
|
|
| 39,382
|
|
| 177.31
|
| 1,199,970 | (8) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 4/27/18
|
|
| 3/7/18
|
|
| 7,807
|
|
| 177.46
|
| 269,966 | (9) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jonathan P. Graham | 3/7/18 | 3/7/18 | (3) | (3) | 4,786,500 | 3/6/19 | 3/6/19 | (2) | (2) | 4,514,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18 | 3/7/18 | (4) | 7,416 | 14,832 | 1,399,992 | (7) | 5/3/19 | 3/6/19 | (3) | 7,430 | 14,860 | 1,399,812 | (6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/18 | 3/7/18 | 3,155 | 559,886 | (8) | 5/3/19 | 3/6/19 | 3,158 | 559,945 | (7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 4/27/18
|
|
| 3/7/18
|
|
| 24,291
|
|
| 177.46
|
| 839,983 | (9) | 11/1/19 | 10/21/19 | 9,176 | 1,999,909 | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 5/3/19
|
|
| 3/6/19
|
|
| 27,568
|
|
| 177.31
|
| 839,997 | (8) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Reflects the date on which the grants were approved by the Compensation Committee. |
| (2) |
|
Represents awards to our NEOs made under our |
|
70 ï 20192020 Proxy Statement 69
|
Executive Compensation Tables
|
|
Our 2019 Company performance goals under the GMIP were financial and operating performance goals weighted as follows: (1) Deliver Results (60%)—30% Revenues and 30%Non-GAAP Net Income (as reported and reconciled in Appendix B); (2) Progress Innovative Pipeline (30%); and (3) Deliver Annual Priorities (10%). There are no payouts for below-threshold performance on any of our Company financial performance goals. Threshold performance on our “Progress Innovative Pipeline” goals results in 50% earned for those metrics. Certain measurements of performance for thenon-financial metrics are more subjective in nature and could result in a very small payout percentage (less than 1% of an annual cash incentive award) and, as such, no threshold amounts are shown in the table. The 2019 Company performance goals derived target and maximum payout levels, which are based on a multiple of salary, are shown in the table below. Maximum performance under all of the performance metrics results in 225% of target being earned. The actual amounts awarded under our Company performance goals are based on achievement of 138.9% performance against target and are reported as“Non-Equity Incentive Plan Compensation” in our “Summary Compensation Table” and are shown in the table below. For a description of ourpre-established Company performance goals and the use of the GMIP in the Compensation Committee’s exercise of negative discretion see “Elements of Compensation and Specific Compensation Decisions—Annual Cash Incentive Awards” in our Compensation Discussion and Analysis. |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards($) | Non-Equity Compensation($) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards($) | Non-Equity Compensation($) | |||||||||||||||||||||||||||||||||
| Name | Threshold | Target | Maximum | Actual | Threshold | Target | Maximum | Actual | ||||||||||||||||||||||||||||
Robert A. Bradway |
| — |
|
| 2,340,000 |
|
| 5,265,000 |
|
| 3,898,000 |
|
| — |
|
| 2,390,769 |
|
| 5,379,230 |
|
| 3,321,000 | |||||||||||||
Anthony C. Hooper |
| — |
|
| 1,053,000 |
|
| 2,369,250 |
|
| 1,754,000 |
| ||||||||||||||||||||||||
Murdo Gordon |
| — |
|
| 307,692 |
|
| 692,307 |
|
| 513,000 |
|
| — |
|
| 1,021,154 |
|
| 2,297,597 |
|
| 1,418,000 | |||||||||||||
Sean E. Harper |
| — |
|
| 974,000 |
|
| 2,191,500 |
|
| 1,623,000 |
| ||||||||||||||||||||||||
David W. Meline |
| — |
|
| 974,000 |
|
| 2,191,500 |
|
| 1,623,000 |
|
| — |
|
| 994,646 |
|
| 2,237,954 |
|
| 1,382,000 | |||||||||||||
David M. Reese |
| — |
|
| 548,154 |
|
| 1,233,347 |
|
| 913,000 |
|
| — |
|
| 970,139 |
|
| 2,182,813 |
|
| 1,348,000 | |||||||||||||
Jonathan P. Graham |
| — |
|
| 841,500 |
|
| 1,893,375 |
|
| 1,402,000 |
|
| — |
|
| 878,494 |
|
| 1,976,612 |
|
| 1,220,000 | |||||||||||||
Reflects estimated payouts regarding performance units granted during |
For all the NEOs, |
All performance units accrue dividend equivalents deemed reinvested in shares and that are payable in shares only to the extent and when the underlying performance units are earned. For more information, see “Elements of Compensation and Specific Compensation Decisions—Long-Term Incentive Equity Awards” in our Compensation Discussion and Analysis. All |
Reflects the RSUs granted during |
Reflects the |
Reflects the grant date fair values of performance units granted to our NEOs |
Reflects the grant date fair values of RSUs granted during |
Reflects the grant date fair values of stock options granted during |
|
20192020 Proxy Statement 71
|
Executive Compensation Tables
|
|
|
Outstanding Equity Awards at Fiscal Year EndYear-End
The following table sets forth summary information regarding the outstanding equity awards at December 31, 20182019 granted to each of our NEOs.
= 0% (Target)
= 0% (Target)
= 0% (Target)
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